DETROIT
ANN ARBOR
-
TO
Don M. Larkin
a.
With my Compliments
and the Autograph
of the Author
i6^uj^
THE TURNING WHEEL
BOOKS BY THE SAME AUTHOR
THE IRON MAN IN INDUSTRY
Atlantic Monthly Press, 1921
THE TELEPHONE IDEA
Greenberg, Inc., 1926
JOHNSON OF THE MOHAWKS
Macmillan Co., 1930
NATIVE STOCK
Macmillan Co., 1 93 1
THE PENNS OF PENNSYLVANIA
Macmillan Co., 1931
THEY TOLD BARRON
1930, and
MORE THEY TOLD BARRON
1931. The Notes of Clarence W . Barron, editor of THE WALL
STREET JOURNAL. Co-editor with Samuel Taylor Moore.
Harper & Brothers.
MOUNTAIN MORNING
Argus, Albany, 1932
AROUND THE CORNER
Sears, 1933
MEDAL BY NORMAN BEL GEDDES
commemorating the twenty-fifth anniversary of General Motors
THE
TURNING WHEEL
THE STORY OF GENERAL MOTORS
THROUGH TWENTY-FIVE YEARS
1908-1933
BY
ARTHUR POUND
Drawings by WILLIAM HEYER
MCMXXXIV
DOUBLEDAY, DoRAN & COMPANY, INC.
Garden City, New York
PRINTED AT THE Country Life Press, GARDEN CITY, N. Y., u. s. A.
COPYRIGHT, 1934
BY DOUBLEDAY, DORAN & COMPANY, INC.
ALL RIGHTS RESERVED
FIRST EDITION
Publisher's Note
i
T is probable that no invention of such far-reaching im-
portance was ever diffused with such rapidity or so quickly
exerted influences that ramified through the national culture,
transforming even habits of thought and language." This
quotation from the report of the Hoover Research Com-
mittee on Social Trends refers to the motor vehicle.
The commonplaceness of motor cars in our daily lives
makes us unaware of their significance. It is almost im-
possible to realize a present-day world without automobiles,
and yet motor cars are little more than a generation old.
This book, then, not only helps to make us conscious of
the marvelously rapid development of a new art, a new
convenience, a new means of transportation, but also, in
giving the history of one of our important industries, it
provides a view of the vast social consequences of inven-
tion and enterprise. And yet General Motors is but twenty-
five years old.
Innumerable histories of nations, rulers, wars, and
peoples have been published of much less significance than
this story of a great industry. Our leading business groups
will find here many instances and examples of enterprising
public service. Here is a broad yet carefully written history
of an industrial enterprise which directly or indirectly
affects intimately the lives of our people.
vi Publisher's Note
In this book will be found illuminating accounts of in-
ventors, financial geniuses, scientists, business statesmen.
Their accomplishments have altered our lives and will affect
those of our grandchildren and great-grandchildren. While
making motor cars, they have also been making history.
Foreword
G
ENERAL MOTORS in 1933 reached its twenty-fifth mile-
stone. Since the founding of General Motors Company of
New Jersey in 1908, the growth of the organization has
contributed a unique chapter to American industrial his-
tory. From beginnings so small that its birth escaped notice
in financial centers, General Motors has worked its way
steadily forward to a place where its leadership in many of
the most exacting branches of production and distribution
is taken for granted and where it meets the public of many
lands with a wide variety of merchandise and services.
Scientific research, close attention to dealer and consumer
needs, and constructive public policies are among the fac-
tors accounting for General Motors' present strength.
The older companies of General Motors, now known as
divisions, go back to the early days of the automotive indus-
try, and some of them far beyond. Their taproots reach
down to carriage- and wagon-building, to firearms, station-
ary and marine gasoline engines, milling machinery, roller
bearings, bicycle gears, lathes, and even to door-bells. Their
branch roots stretch back to the beginnings of scientific
experiment, since the self-propelled vehicle is the child of
physics and chemistry. Chapters n and in trace that long
evolution. As one follows the rise of General Motors
against the broad background of latter-day industry and
viii Foreword
science, he comprehends that the flowering of large-scale
production in our day is the inevitable result of generations
of inventiveness, organizing ability, and the willingness of
capital and labor to pull together toward common objec-
tives. Among those objectives are the lifting of the stand-
ards of living, the satisfaction of old wants with less labor,
and the creation of new wants on a higher level of comfort,
convenience, and culture. Modern industry has conquered
the old-time dearth of goods, and more and more it
searches for a balance wheel through whose steadying influ-
ence its products can remain available to all industrious men
and women at all times. To steady economic life is perhaps
as real an industrial need today as mass production was
fifteen years ago, as real a need as the automobile was forty
years ago, when men traveled at the pace of the horse over
wretched roads.
My acquaintance with General Motors began at its birth
in 1908, and as a somewhat impartial observer of social
trends I have watched its progress with keen interest ever
since. After observing General Motors employees as work-
men and citizens, I began, more than thirteen years ago, to
write in Flint, Michigan, my Iron Man papers, noting some
of the social effects of modern industrialism. The Cor-
poration seemed then to foreshadow many of the develop-
ments on the social side which have since come to pass. I
welcomed the opportunity to complete a full-length study
with access to records, believing that the story of a great
corporation's growth through twenty-five years would be
of more than passing value, since corporations are the most
efficient of modern groupings and probably also the most
meaningful from the standpoint of basic social relations:
work and wages, production and distribution, consumption
and investment. If it appears that approval is voiced here
more freely than the reverse, that is because the record is
clean and clear.
As I review the history of General Motors in my mind,
I think of the many thousands of men and women who
Foreword ix
made its present competence come to pass by their labors in
factories, laboratories and offices, and in the field; of
workers in all branches of production; of craftsmen and
designers striving to combine beauty with serviceability; of
scientists patiently attacking problems in chemistry, elec-
tricity, metallurgy, and engineering; of foremen, superin-
tendents, and inspectors; of dealers and salesmen in every
land searching for the sales by which the Corporation lives
and by means of which it pays wages and dividends. This
book is the history of a joint effort which succeeded be-
cause, when a long, strong pull was needed, team-play tri-
umphed over the frictions which tend to dissipate human
efforts and destroy institutions.
Those who recognize in General Motors a force of the
first magnitude in America's economic life will find here
several references to the Corporation's policies which have
contributed to its present standing. Some of these policies
apply to interdivisional operations, others to employees,
dealers, suppliers, and the public. Beyond the equities in-
volved in strictly commercial contacts, any large corpora-
tion which touches the lives of millions of persons here and
abroad can scarcely escape being rated and appraised by
public opinion. General Motors has been a leader in pro-
viding full and detailed accounting to stockholders and in
giving the general public accurate news of what it is doing
and why it is doing it.
The history of General Motors records scientific and
commercial achievements of a high order, but this is true
of many corporations. What makes this corporation most
interesting is the fact that its expansion was rapid and
yet it was marked by relatively few of the discords usually
connected with swift industrial growth.
In the appendices will be found historical notes on many
subsidiaries and affiliates not treated in the text.
The author acknowledges gratefully the assistance of
persons too numerous to mention who have contributed in-
formation to this work, including many formerly active in
x Foreword
Corporation affairs but now retired, and others whose busi-
ness relationship with General Motors in its early days
qualifies them to testify on the events of that period.
Special thanks are due to Dr. Dixon Ryan Fox, Professor
of American History at Columbia University, for his in-
terest and encouragement, to Dr. John S. Worley, Pro-
fessor of Transportation at the University of Michigan,
and to Dr. M. M. Quaife, secretary-editor, the Burton
Historical Collection, Detroit Public Library, for their aid
in research.
ARTHUR POUND
Contents
PAGE
Foreword vii
CHAPTER
I America on Wheels I
II The Evolution of Self-Propelled Vehicles 6
III The Formative Period: 1879-99 27
IV Oldsmobile: First "Quantity" Car 41
V Buick: The Foundation Stone of General
Motors 68
VI Oakland and Pontiac: Old and New 91
VII Cadillac : The Triumph of Precision 100
VIII The Birth of General Motors in
IX The Bankers Take the Wheel 131
X Chevrolet : The Cinderella of Motor-Car
History 143
XI The Corporation Established 153
XII The War Years 167
XIII The Expanding Corporation 176
XIV The New Era Under President du Pont 193
XV Rounding Out General Motors 209
XVI Later Histories of Passenger Car Divi-
sions 218
xi
Xll
Contents
CHAPTER
XVII
XVIII
XIX
XX
XXI
XXII
XXIII
XXIV
XXV
XXVI
XXVII
XXVIII
XXIX
APPENDIX
I
II
III
General Motors of Canada, Limited
General Motors Across the Seas
Research: The March of the Open Mind
Body by Fisher: The Motor Car as a
Style Vehicle
Frigidaire and Electric Refrigeration
Commercial Vehicles
General Motors in Aviation
The Point of View of General Motors
The Stockholder Interest
Marketing the Motor Car
Financing and Insuring the Buyer
Cooperative Plans
Public Relations
Conclusion
Roster of General Motors Officers and
Directors
General Motors at the Century of Prog-
ress Exposition
IV Short Histories of Subsidiary and Affili-
ated Companies
V Some Discontinued and Inactive Com-
panies
Bibliography
Index
PAGE
235
243
266
288
304
310
3i8
329
348
359
380
395
4i5
432
Chronology of Self-Propelled Vehicles 435
448
453
456
484
491
501
Illustrations
Medal by Norman Bel Geddes Frontispiece
PAGE
Ancient Egyptian Wheel 2
Simon Stevin's sailing chariot, Holland 7
Cugnot's artillery tractor, 1769 II
"Orukter Amphibolis" — Oliver Evans' Amphibian 12
First self-propelled vehicle to attain speed of ten
miles per hour, 1810 14
Sir Goldsworthy Gurney's steam carriage 16
Richard Dudgeon's steam carriage, New York, 1860 22
First motorcycle — oil motor 29
R. E. Olds's first horseless carriage 33
R. E. Olds's first factory, Lansing, Michigan 35
Horseless buggy of Charles E. Duryea, 1893 37
"Horsey Horseless Carriage," Battle Creek, Michi-
gan 39
Glidden Trophy 42
R. E. Olds 45
First Oldsmobile, 1897 48
Xlll
xiv Illustrations
PAGE
Authorization for construction of first Oldsmobile 49
First American automobile factory, Olds Motor
Works 52
Detroit to New York, Roy D. Chapin in Oldsmobile 54
Oldsmobile curved-dash runabout, first quantity car 63
Chauncey M. Depew, at wheel of Olds runabout,
1904 64
First Buick, Detroit, 1902 70
Original Buick factory at Flint, Michigan, 1903-4 75
First Buick car built at Flint, Michigan, 1903 77
William C. Durant 83
1904 Buick 88
Henry M. Leland 101
Cadillac "one-lunger," 1902 104
Cadillac cars which won the Dewar Trophy, 1908 106
Dewar Trophy 108
C. S. Mott 112
James J. Storrow 127
Thomas Neal 133
Charles W. Nash 138
Walter P. Chrysler 140
The first Chevrolet, April, 1913 144
Chevrolet uRoyal Mail" roadster, 1914 146
Model 490, Chevrolet 149
John J. Raskob 158
Buick war tractor, 1918 169
First home of Dayton Engineering Laboratories 171
General Motors Building, Detroit 180
Illustrations xv
PAGE
Fred J. Fisher 182
Pierre S. du Pont 195
Alfred P. Sloan, Jr. 206
Opel Six at Shanghai, China 208
Bob Burman at wheel of Buick racer 220
Cadillac: first car with electric self-starter 223
W. S. Knudsen 228
Robert McLaughlin 236
R. S. McLaughlin 238
Opel car in African exploration 251
Charles F. Kettering 270
Research Building, Detroit 277
Charles T. Fisher 290
Miniature Napoleonic coach 294
Map of General Motors Proving Ground 302-303
Early motor fire engine 311
Pioneer police patrol wagon, Chicago 314
GA-43, all metal monoplane 320
GA-43 : front view 323
GA-43: side view 325
Flying Lifeboat: GA-FLB 327
Weather Bureau Station, General Motors Proving
Ground 346
Entrance to General Motors Proving Ground 346
New York headquarters of General Motors 351
Lammot du Pont 353
Buick on steps of Summit House, Pike's Peak 358
Night Scene: Century of Progress Exposition 366
xvi Illustrations
PAGE
Chevrolet Assembly Line 370
Dr. Carlos C. Booth 378
Harry H. Bassett 410
General Motors Institute, Flint, Michigan 412
Albert Champion 457
Herbert C. Harrison 468
John Wesley Hyatt 469
Alexander Winton 481
THE TURNING WHEEL
Chapter I
AMERICA ON WHEELS
I
N A single picture are caught and recorded centuries of
history. In the distance, ready to vanish over the hill, is an
Indian family departing with its poor goods and beaten
gods. A tiny pony strains between two poles, across which
is a laden platform. The poles drag on the earth. In the
foreground is the settler's covered wagon, drawn by strong
horses and ready to roll westward as long as its tall, iron-
shod wheels hang together.
The wagon holds more wheels and the produce of wheels :
a spinning wheel and the cloths which wheels have fabri-
cated; a plowshare which some wheel has helped to smooth
and point. There is a rifle fashioned on a lathe to which
the principle of the wheel has been adapted. A continent
is being surrendered to those who come on wheels. The
conqueror sets his wheels in motion and moves on with calm
assurance to occupy the empire which wheels have enabled
him and his kind to possess.1
It is one of the paradoxes of history that America, where
modern civilization runs on wheels, was a wheel-less country
before the white man came to its shores. Other peoples,
Bernard de Voto, Mark Twain's America, p. 24.: "That winter he
[Marcus Whitman, the missionary] gathered a large mission. Also he found
a wife; and she and another woman joined the caravan that took the trail
the following spring [1836]. The caravan possessed, too, wagons and a light
cart that were to go further into transalpine America than wheels had ever
gone before. The western filtrate had now no boundary to its passage but
the Pacific sea."
2 The Turning Wheel
no more primitive than the American Indian, had discov-
ered and applied the wheel in the dawn of civilization; in-
deed, it is likely that without the wheel Western civilization
would never have emerged from its birth throes. The two-
wheeled chariots of Nineveh broke down the barriers of
space and the boundaries of empires built on self-contained
river valleys. The mergings of peoples, exchange of ideas,
tools, and goods over wide distances — in short, the early
education of the race in commerce, mechanics, language, and
thought — were destined henceforth to proceed through and
by, and to a large extent directly on, wheels.
Yet prehistoric America somehow missed this potent ap-
plication of the wheel to earth. Their grave lack was early
noted by scholars. The learned Dr. Robert Hooke, in the
1726 edition of his Philosophic Experiments and Observa-
tions, says that ignorance of the wheel in aboriginal Amer-
ica indicates that its inhabitants could not have come hither
from Europe, Africa, or Asia, since the wheel "is an in-
vention of so great use, that it seems impossible to be lost
by mankind, after it be once known."
Ancient Egyptian Wheel
The American Indians possessed marked capacities in
many directions. They were excellent workers in stone, as
well as hardy hunters and bold warriors. They traversed
wide areas in both war and chase; they were essentially
moral and lived a primitive religion of exalted concepts
and close harmonies. In their intertribal relations they were
capable of acute political sagacity; The Great Peace Pact
America on Wheels 3
of the Five Nations of the Iroquois Confederacy, which
endured at least three centuries, is one of the most subtle
adjustments of conflicting national political interests ever
devised, more intricate and better balanced than the League
of Nations. Yet the Indian gave way before the whites be-
cause the newcomers had better tools, especially better
weapons and vehicles.
At one time or another the American aborigines had used
the other five primary machines: the lever, wedge, screw,
pulley, and the inclined plane. With these the Mayas of
Yucatan and Guatemala and the Incas of Peru built mas-
sive edifices. But there is no evidence that the Red Man
ever had command of the wheel. In the meantime, through
the centuries of recorded time and before, the Asiatics,
Europeans, and Egyptians had not only evolved wheeled
carts and chariots, but also they had made so many efficient
combinations of the wheel with the other five primary ma-
chines that they had evolved the compass to guide them to
America, domestic tools of many sorts, the well-ground
sword blade, and the musket which spat fire. The conquerors
had inherited a superior technology as well as superior form
of carriage on land and sea. Hence the aborigines gave
way. One reason — and perhaps the root reason — for the
failure of the aboriginal inhabitants effectively to occupy
and defend North America may well have been their failure
to master the wheel.
But merely to put two wheels on the ground, with an
axle-tree between them, is not enough to satisfy an artful
folk with pressing problems to solve — problems of suste-
nance and distribution, problems of state and war. The
fabled wheel of Ceres, the goddess of Agriculture, might
be turned into a country cart, the scythed chariot might do
for war, but not for long could either satisfy the eternal
demand of a questing people for more speed, more thrills,
more wealth. The ancients applied more power to wheels
by harnessing eight and twelve horses to their chariots and
as many oxen to their wagons, increasing their teams of
draft animals up to the full limit of the wit and muscle of
men in controlling them. Within the limits prescribed by
flesh and blood these ambitious men of ancient days did
4 The Turning Wheel
what they could to increase their power in transport. They
built gorgeous equipages of state, rode furiously in their
hunts, developed strains of horseflesh suitable to various
purposes — chargers for war, draft horses for tillage, light
palfreys for milady to ride, high-stepping carriage horses.
They developed wheeled vehicles in great variety, from the
simple cart to impressive and beautiful coaches of royalty.
But ever and always each generation was restricted in its
burning desire to conquer space and time by the fact that
the horse represented at once the strongest and most flexible
power plant he could apply to the wheels of his vehicles.
Other animals might outdraw the horse, but no other animal
could combine pulling power with as prompt acceleration.
The unique conformation of the horse's leg from hoof to
hip-joint gives him a leverage out of all proportion to his
weight, and for centuries he was the best motive force man
had at his disposal for transportation purposes.
The Horse Age lasted from the dawn of history to recent
times. In those slow-moving centuries enormous advances
were made in other directions, but land transport remained
keyed to draft animals. Man charted the solar system, dis-
covered the mass of the earth by laying out a geographical
degree on the plains of Greece, applied the arch, tenon,
and pillar in architecture, constructed huge cathedrals of
surpassing beauty, worked out the basic laws of physics
and mathematics, began experiments in chemistry, developed
marine transportation from the oar to the sail, applied the
compass to the discovery of America and the circumnaviga-
tion of the earth, built large and cunningly contrived vessels
for the mastery of wind and water, and harnessed water
power to turn looms. Laboriously he brought water trans-
port by means of canals to assist in his problems of land
carriage. In all the practical arts the advance of knowl-
edge had been tremendous, but from the dawn of history
down to modern times mankind had available in quantity
for land transport no better motive power than the horse.
Yet the challenge toward improvement persisted. Dimly
the more progressive peoples have understood the truth
laid down in the report of a Select Committee of the
British House of Commons on Highways in 1808, that
America on Wheels 5
"next to the general influence of the seasons upon which
the regular supply of our wants and a great proportion of
our comfort so much depend, there is perhaps no circum-
stance more interesting to men in a civilized state than the
perfection of the means of interior communication."
A philosophical investigator of transportation has said,
"with the exception of land and ruins there are few things
of any material value to man which do not derive that
value, in part at least, from transport from their original
position." One might go further and say that life, shorn of
the prospect of ever improving transportation, would be
dull, flat, and unprofitable. Truly civilization has run on
wheels from the stone discs of the primitive cart to the
rubber tires of the automobile.
Chapter II
THE EVOLUTION OF SELF-PROPELLED
VEHICLES
T
In
.HE evolution of transport has been worked out by John
Brisben Walker and others somewhat as follows :
Floating log
Animal's back
Sledge down hill
Horse-drawn sledge cart
Canoe
Ox cart
Chariot
Oared galley
Sedan chair
Sailing vessel
Canal
Man-powered carriage
Sailing chariot
Coach and carriage
Velocipede
Free balloon
Steam carriage
Steamship
Railroad
Bicycle
Cable car
Electric trolley car
Automobile
Airplane and airship
Observe, in the sequence, the progress from the simplest
of motive powers, water running under the pull of gravity,
to the explosions of rarefied gases in the internal combus-
tion engine. Those in the first half of the list are shrewd
adaptations of forces found in nature. Of special interest is
the sailing chariot, known in China, and brought to its
peak in Holland, where one designed by Simon Stevin,
about 1600, covered forty-two miles in two hours, carrying
twenty-eight persons, and was used quite regularly.
6
Evolution of Self-propelled Vehicles 7
Even before man tried to harness the wind to land trans-
port, he endeavored to "beat the horse" by various com-
binations of muscle and machinery. Heliodorus notes a
triumphal chariot at Athens moved by slaves who worked
machinery. A Jesuit missionary in China, Matthieu Ricci
(1552-1610), declared that he had traveled there inside a"
Simon Stevin's sailing chariot, Holland, about A. D. 1600
great wheel, propelled by two fellow passengers who used
levers to give the wheel forward motion. A beautiful series
of drawings comes down from the Middle Ages, showing
men propelling heavy and ornate carriages by worm and
other gears. The last supreme effort in that direction seems
to be Sir John Anderson's 1831 patent, in which twenty-four
oarsmen provided the energy.
We are accustomed to think of the steam engine as a
world-shaking invention, but the fact is that for centuries
after its first application the world wagged on without giv-
ing the steam engine a second thought. Hero of Alex-
andria, living in the second century before Christ (130
B.C.), described in his Pneumatica his famous self-propelled
8 The Turning Wheel
apparatus known as the Aeolipile, and also a fountain, both
operated by steam. The principle used in the engine which
worked the fountain became highly important centuries
later, but the scientific Hero appears to have had no dis-
coverable successor until the forgetful Middle Ages had
come and gone, although engines like his probably were
used in unimportant ways and more to amuse than to per-
form useful work. After the lapse of 1300 years, that
bold monk, Roger Bacon (1214-94) uttered a prophecy
to which no one listened: "It will be possible to construct
chariots so that without animals they may be moved with
incalculable speed." The prophecy is less remarkable than
the revelation it gives of the complete loss of interest in
science between Hero's time and that of Roger Bacon; so
the latter could do no more than prophesy in a field where
the former actually had experimented.
With the Renaissance, interest revived in science as well
as in art and letters. Giovanni Baptista della Porta in 1601
began where Hero had left off sixteen centuries earlier, thus
anticipating SaveryTs first practical and productive steam
engine by nearly a century.
Ramsay and Wildgoose were not thinking of steam when
they applied for an English patent, in 1619, for "drawing-
carts without horses." However, the edge of the curtain
was being drawn aside a little about this time for the intro-
duction of the modern Steam Age. In 1629 Giovanni
Branca, an Italian, came forward with a steam turbine, now
rated superior to Hero's steam engine and also to that of
the same type generally accredited to the great English
physicist, Sir Isaac Newton (1642-1727), which was along
the same line. It is likely that the Newton engine was made
after Newton's suggestions rather than by Newton him-
self. Both Branca and Newton suggested certain uses for
their simple engines, among them the propulsion of a
vehicle by a jet of steam, a means still used in cheap toys.
A Jesuit missionary in Pekin, China — Father Verbiest,
about 1630 — used an aeolipile, says Lavergne, "with jets
of steam playing on a revolving winged wheel geared to the
wheels of a car." In 1633, Edward Somerset, Marquis of
Evolution of Self-propelled Vehicles 9
Worcester, fathered a double-action steam engine, with dis-
placement chambers, which was the first useful engine,
though not commercially successful.
While Englishmen and Italians were pioneering in steam,
a Dutch scientist, Christian Huyghens, in 1680 described the
first step in the evolution of the modern internal combus-
tion engine, the invention of a first explosion engine. In this
ancestor of all internal combustion engines the ignition of
gunpowder in a cylinder produced a vacuum into which out-
side atmospheric pressure pushed the piston. Ten years
later, in 1690, Denis Papin, a young French doctor ac-
quainted with Huyghens, substituted steam for gunpowder,
thereby earning himself a place in history as the inventor of
the earliest piston-and-cylinder steam engine, although his
efforts fell short of practical success.
In 1698 Thomas Savery (1650-1715) obtained a patent
for a steam engine designed to raise water, and applied to
it a safety valve by J. T. Desaguliers, thus realizing on the
suggestion of della Porta, put forth nearly a century
earlier. Raising water from coal mines seems to have been
more of a problem at this time than swift transportation,
and for nearly a hundred years that field was cultivated by
inventors to the practical exclusion of others. Thomas New-
comen, an associate of Savery, produced various atmos-
pheric steam engines, from 1705 to 1711, which found im-
mediate and high favor with the mine operators. Other
engineers contributed to this development, yet none of them
seems to have followed seriously Papin's lead toward loco-
motion. But witty Bishop Berkeley could see further than
the men who knew tools; in 1740 he said: "Mark me, ere
long we shall see a pan of coals brought to use in place of
a feed of oats."
Soon men again began to think about power transport.
Spring-driven carriages were made in Germany in the
Middle Ages. The spring method of propulsion lingered for
a long time and developed some fairly successful vehicles,
but of course they did not solve at all the problems of speed
and power. A step in the latter direction came a little later,
in 1753, when Daniel Bournoulli demonstrated to the
French Academy the point at which steam power could be
10 The Turning Wheel
applied to navigation, and was given a prize by that body
which even then exercised an inspiring influence on the new
science. The stationary steam engine had proved its useful-
ness, and was at work daily in hundreds of places. The
question was: how to make the steam engine portable, gear
it to wheels, and get it on the road?
This question tormented the learned Dr. Erasmus Dar-
win (1731-1 802 ) , who urged Boulton and Watt, the steam-
engine manufacturers, to produce a "fiery chariot" which
would fulfill the startling prophecy contained in Darwin's
poem, The Botanic Garden:
Soon shall thy arm, unconquered steam, afar
Drag the slow barge, or drive the rapid car;
Or on the waving wings, expanded bear
The flying chariot through the field of air;
Fair crews triumphant, leaning from above,
Shall wave their fluttering kerchiefs as they move,
Or warrior bands alarm the gaping crowds,
And armies shrink beneath the shadowy clouds.
James Watt was a canny Scot who is generally regarded
as the inventor of the steam engine, though we have seen
that he had several predecessors. He made, however, a
good many telling improvements on Newcomen's engines
from 1769 on, bringing the steam engine to the point where
others more daring than himself were willing to place it in
carriages and vessels.
So the scene shifts to France for the great experiment
in which a full-sized steam carriage, designed for a special
task, took the road. It will hardly do to say flatly that this
was the first self-propelled vehicle, but it was certainly the
first definitely constructed for a concrete and practical pur-
pose in contrast to those strictly experimental and of small
scale. Under the stern call of war Captain Nicholas Joseph
Cugnot designed and directed the construction of an
artillery gun tractor which, had it been successful, would
have given Royalist France undisputed control of Europe.
Seldom have the destinies of the world waited so directly
upon the success or failure of a machine.
Evolution of Self-propelled Vehicles 11
It was a three-wheeler, with the single front wheel carry-
ing a tremendous load in the boiler and engine, all of which
had to be moved on a pivot in order to change direction.
But it also had the failing, repeated over and over during
the next century, of being underpowered for the work to be
done. It traveled at about three miles an hour, had to be
refueled at fifteen miles, and on the second test, upset. The
Cugnot's artillery tractor, 1769,
first self-propelled vehicle built for road work
fickle Ministry, which had financed construction at great
expense, turned upon the inventor, and he went into exile.
When Napoleon came to power twenty years later, he re-
called Cugnot, put him on a pension, and sought to revive
the project, but by failing to follow up this idea of artillery
transport, he lost a telling chance to increase the mobility
of his artillery, just as his failure to adopt Fulton's sub-
marine lost him his chance to invade England.
12 The Turning Wheel
Three years after Cugnot's daring effort, Oliver Evans
(1755-1819) of Delaware dreamed, in 1772, of using steam
to propel carriages, but, by his own statement, did not work
out the plans for his engine till I784.1 He was certainly the
first American to apply steam to a road vehicle. It was he
who received the first United States patent covering a
"self-propelled carriage," dated October 17, I789.2
'Orukter Amphibolis" — Oliver Evans' amphibian,
driven in Philadelphia, 1804
This extraordinary man, whose genius was better recog-
nized abroad in his day, and still is, than at home, antici-
pated Trevithick in applying the high-pressure principle to
steam engines. He sent to England the drawings of his
1787 engine; these are said to have been seen by Trevithick
in 1794-95 and applied by him. In 1804 Evans astonished
the mechanical world by moving in Philadelphia, partly
by water and partly by land, a combination steam-wagon
and flatboat, the first authentic amphibian of record. A pic-
ture of Evans guiding his 2i-ton Orukter Amphibolis hangs
in the Automobile Wing of the Arts and Manufactures
Section of the Smithsonian Institution at Washington, D. C.,
facing the display of ancient motor vehicles which are in
direct line of descent from Evans* first American self-
propelled vehicle. He is the great American name in the
early stages of motor vehicle development.
Another candidate for inventor of the first American
steam carriage is Dr. Apollos Kinsley of Hartford, who is
*The Young Steam Engineer's Guide, by Oliver Evans. First edition,
Philadelphia, 1805.
Encyclopaedia Britannica, nth ed. vol. 10, p. 2.
Evolution of Self-propelled Vehicles 13
described in Forest Morgan's Connecticut as a Colony and
a State as "driving the highways of Hartford in one of the
first steam carriages ever conceived, of which he was the
inventor at the close of the i8th century."
Many an idea which events have shown to be sound was
unduly delayed by the inability of inventors to find back-
ing. A strange example of this misfortune is William Mur-
dock (1754-1839), a subordinate of Boulton and Watt,
who made a model of a steam carriage which was far
ahead of its time in the simplicity of the application of
power, but he never patented it because his employers dis-
couraged him.
There is something dynamic and challenging in the turn
of a century which stirs the soul of man to fresh creative
effort. It was so in 1800. Inventions flooded into the British
patent office. Then Richard Trevithick (1771-1833), the
"Captain Dick" who was destined to taste the triumph of
placing the first locomotive on wheels, to make and lose
fortunes, and to die at last in poverty, stepped into the field
of the steam carriage. Wherever Dick Trevithick took his
stand in his prime he made history. He brought forward in
1 80 1 a steam carriage whose boiler was of American
descent, since Trevithick was directly influenced by the
Americans, Oliver Evans and Nathan Read. It produced
sixty pounds pressure. Trevithick used a long-stroke engine
coupled directly to the driving wheels. He had been at work
on this design five years. It was put together in a black-
smith shop. One of his friends left this lively picture of its
initial trial :
In the year, 1801, upon Christmas eve, Captain Dick got up steam,
out in the highroad, just outside the shop. When we see'd that
Captain Dick was a-goin' to turn on steam, we jumped as many as
could, maybe seven or eight of us. 'Twas a stifEsh hill but she was
off like a little bird. . . . They turned her and came back to the
shop.
Merry Christmas for Captain Dick — that of 1801! He
ran this car in and out of London several times at an aver-
age speed of five miles an hour. But there was then no
market for such an innovation, and Dick and his partner
14
The Turning Wheel
Vivian approached the end of their slim resources. In May,
1803, Trevithick thought he could sell one quarter interest
in his patent for £10,000, but the deal fell through. His car-
riage tore down a fence and was denied the road by pur-
blind authority. The carriage was dismantled; the engine
sold to operate a mill. Alas for dreams ! But within another
year Captain Dick was ready to place upon the rails the first
steam locomotive, and by so doing earn beyond cavil a
secure fame.
England in the first decade of the nineteenth century was
still a rural and rustic land, full of conservatives, rich and
poor. The roads were not generally good, but the main
roads were kept passable by toll-roads associations in which
considerable capital was invested. The coaching interests
and the toll-road interests coincided on one point at least,
that newfangled vehicles should be discouraged.
First self-propelled vehicle to attain speed of ten miles per hour, 1810
These interests were sure to rise against a new form of
highway transport which drew nearer practicability year by
year. In 1811 Blenkinsop of Leeds made a practical appli-
cation of steam power in transport by drawing thirty coal
cars from Middletown to Leeds, three and a half miles, in
one hour. Interest rose until hardly a technical magazine
appeared without mention of some new vehicle or experi-
ment. The Monthly Magazine (London) for November i,
1819, contains five items on self-propelled vehicles, mostly
Evolution of Self-propelled Vehicles 15
hand- or foot-propelled in ingenious ways, and all prob-
ably bone-shakers. But the extent of the interest in self-
propelled vehicles in London can be seen in this sentence:
"A steam carriage has been invented in Kentucky, of which
word is eagerly awaited."
In 1821 Julius Griffiths led off, with a well made steam
carriage, a line of these vehicles destined to become so
numerous in the next few years that the highway problem
they created caused a Parliamentary investigation.
In the primitive state of the art, inventors had not yet
learned even the primary truth that driving wheels would
give them enough traction, and that passengers could be
safely carried on the same chassis as the engine. Like the
locomotive, which from the first was a "drag" pulling other
vehicles, many of the early steam carriages made no pro-
vision for passengers, and these were accommodated in
stagecoaches attached as trailers. Of the latter type
was the Patent Steam Carriage of 1824, designed by
W. H. James and produced by him with the aid of Sir
James Anderson, Bart. It contained several features of
novelty and long-continuing interest. James used four
cylinders coupled to two crankshafts. Each pair of cylinders
and each driving wheel was independent of the other, to
avoid a compensating gear in turning corners. In a second
vehicle, 1829, James forsook his original principles of
design, "mistaking failure in detail for failure in principle,"
and produced a steam tractor more in accord with common
practice.
While England was entering into a fury of experimenta-
tion, there appeared in France, in 1828, a steam carriage
by Pecqueur of Paris which Lavergne says contained the
germ of all the vital mechanisms of the modern automobile,
chief among these being a driving wheel geared to the rear
axle, planet gearing, spring suspension, and a competent
steering arrangement. What English invention lacked in
these respects it made up for in aroused feeling among
inventors, whose search for capital and public acclaim
lashed them into furies of controversy against each other.
It is impossible, at this distance in time, to sift the wheat
from the chaff in the printed evidence of these broils.
16 The Turning Wheel
Sir Goldsworthy Gurney occupies the chief place in this
literature of controversy. As a boy he had seen Trevithick's
steam carriage and followed that lead by diligently pro-
ducing a succession of coaches known as Gurney's steam
carriages. He is said to have made, in 1829, the first long
sustained journey by mechanical means, from London to
Bath and return, a distance of 200 miles, at a speed of 15
Sir Goldsworthy Gurney's steam carriage, London to Bath, 1829
miles per hour. This record is challenged by a rival, how-
ever: the picturesque soldier of fortune, Colonel Francis
Maceroni. The Colonel, with a rival machine in hand, had
fish of his own to fry.
This and many other jealousies were brought into the
open at and immediately following the hearings of the
Select Committee of the House of Commons in 1831, one
of the important milestones in the history of self-propelled
vehicles, because England then led the world as an indus-
trial nation, and the state of the art was presented to the
Committee by the leading inventors and engineers. This
Parliamentary inquiry seems to have been an honest attempt
to discover how far the highways were likely to be injured
by steam vehicles, and what promise mechanical transport
held out to the nation. We will understand its importance
if we recall that the new departure in transportation was
under fire from several substantial interests: the alliance
between turnpike associations and stagecoach operators,
the widespread antipathy of a public always conservative
Evolution of Self-propelled Vehicles 17
and in those years of Chartist discontent bitterly opposed
to the introduction of machinery in all lines of work, and
the newly arisen railroad interest. The first railroad for
regular passenger and freight traffic, the Stockport and
Darlington, had begun operations six years earlier. Other
railroads had been opened; some of them were actually
earning money, and one of them was in a position to pay a
first dividend. With this record of earnings, capital gen-
erally was for "clearing the track" of competition.
Almost from the moment when Trevithick put his first
steam engine on the rails, British railroading had marched
ahead, until, after only twenty years of trial, railroading
had begun to pay. Against this notable progress, steam
travel on the highways could produce nothing comparable.
Steam on the highways had never earned a shilling, had
killed some persons, and thrown whole countrysides into
terror, and both the influential and the ignorant set their
weight to hold the highways for horses and pedestrians. Sir
Goldsworthy Gurney, for instance, was mobbed and his
engineer injured at a country fair.
In the ten years from 1828 to 1838 Walter Hancock
built nine large steam carriages, of which six were used in
carrying passengers. His buses were safe, dependable, and
handsome. The public liked them, and Hancock took in
large revenues but was always under heavy expense from
pioneering experiments and exorbitant tolls. He testified
that one of his coaches, in three months* service on the Pad-
dington road, covered 4,200 miles and carried 12,761 per-
sons, without mishap or serious delay. He offered to carry
mails at the then high speed of 20 miles an hour, the usual
mail speed, attained through relays of horses, being 12
miles an hour on the fastest routes. He is credited with
being the first power-vehicle designer to use chain trans-
mission and the first to make tight metallic joints. His
wedged drive wheels are also considered important.
Not far behind Hancock in the point of impressing the
Committee with reliability of operation was Sir Charles
Dance. Against Dance it was alleged that his steamer was
noisy and dangerous, dropping coals and driving horsemen
and teams into the fields.
18 The Turning Wheel
Another interesting development of the Committee hear-
ings was the reappearance of Captain Dick Trevithick, to
say that he had a new boiler with a condenser attached, so
that the same water could be used over and over.
With full information before it, the Select Committee of
Commons reported that it was convinced that :
1. Carriages can be propelled by steam on common roads at 10
miles per hour.
2. That at this rate they have conveyed upwards of 14 persons
per vehicle.
3. That their weight, including engine, fuel, water and attendants,
may be under three tons.
4. That they can ascend and descend hills of considerable inclina-
tion with safety and facility.
5. That they are perfectly safe for passengers.
6. That they are not (or need not be, if properly constructed)
nuisances to the public.
7. That they will become a speedier and cheaper mode of convey-
ance than carriages drawn by horses.
8. That as they admit of greater breadth of tire than other car-
riages, and as the roads are not acted on so injuriously as by the
feet of horses in common draught, such carnages will cause less
wear of roads than coaches drawn by horses.
9. That rates of toll have been imposed on steam carriages which
would prohibit their being used on several lines of road, were
such charges to remain unaltered.
A clear victory, on paper, for the road steamer men! If
Parliament had seen fit to follow the findings of the 1831
report with appropriate legislation, Great Britain would
have led the world in motor transport, adding greatly to
her already dominant industrial leadership. England had
the inventors, the roads, the capital, and a clear lead in
the practical operation of self-propelled vehicles, but she
surrendered this advantage by placing the new industry
under handicaps which became more and more severe until
at last, by the Act of 1865, ^ was decreed that no power
vehicle could use a highway unless it was preceded by a
man on foot carrying a red flag. Sometimes the rule was
relaxed to let the red flag be carried by a man on horse-
back, as is still done on Tenth Avenue, New York, in
Evolution of Self-propelled Vehicles 19
advance of New York Central freight trains. This is a
stock example of the restraint of speed and flexibility of
transportation by insisting that the old methods shall con-
trol the new.
Arbitrary discrimination in tolls was in itself almost
enough to drive steam carriages from English highways;
their use decreased greatly after 1836. Britain deliberately
had turned her back on progress in an art where she was
once ascendant. It has been said that an English Rip Van
Winkle, falling asleep in 1831, would have awakened sixty
years later in a world little further advanced, as respects
highway transport, than that in which he fell asleep. The
price Britain paid for this unjust interference which exerted
state influence in favor of stagecoaches and railroads has
been enormous in loss of trade and prestige. Because of this
interference France and America, where government and
public opinion both favored the new idea in transport,
forged ahead. The French Academy honored inventors, and
the French public was favorable, though still limiting high-
way speed for self-propelled vehicles to four miles an hour
in the country and two miles in town.
America at the very beginning of power transport en-
couraged transport improvements in the highway field,
falling into the errors of repressive control much later than
England. Maryland early gave Oliver Evans the right to
use its roads in his experiments. One of the first American
steam carriages of record, which Thomas Blanchard
brought out on the streets of Springfield, Massachusetts, in
1825, so far commended itself to the Massachusetts legis-
lature that Blanchard secured an official endorsement; but
he could find no buyers. The Kentucky vehicle which Eng-
land was eager to hear about in 1819 seems to have dis-
appeared from history, and we have but a faint trace of
another, which one T. W. Walker of Edgar County, Illi-
nois, late of Vincennes, Indiana, is said to have made and
operated in 1824 or 1825. William T. James of New York
City produced one steam carriage in 1829 and another in
1830. But whatever these vehicles were, we can be sure that
they were applauded and went their way without official
interference, because such interference would be of record.
20 The Turning Wheel
These American vehicles, like Evans' early efforts, en-
countered another sort of handicap which was effective in
discouragement — bad roads. America was still in the
pioneer stage of development; few city streets were paved;
in the country the roads were wretched, and even in the
long-settled East they remained almost impassable in wet
weather. This country of magnificent distances turned to
railroads as an easy escape from mud.
The race for public favor and use between the steam
railroaders and the steam highway school of transport
ended in victory for the former in both Great Britain and
America. There remained France, blessed with a splendid
system of highways, a fertile inventive genius, and a sport-
ing element both in the aristocracy with means to finance
experiments and in a public which relished thrills.
In England mechanical transport had been pushed into
the fields. From Worby's tractor in 1841 clear through the
'seventies there is a steady development of the steam trac-
tor under the encouragement of certain great English
landlords. There were also some notable developments in
the highway field, but since use of the highways was so
restricted, these were restricted to private courses or back
roads, or else their owners were compelled to a "boot-
leg" traffic, eluding the authorities. As might have been
expected, various enthusiasts outwitted the authorities by
using the roads illegally. A vehicle which has received a
good deal of attention because of its "bootleg" operations
was the Fly-by-Nlght, a steam carriage weighing nearly
seven tons, built by W. O. Carrett of Carrett & Marshall,
Leeds. After it was publicly exhibited and found of no
legal use, Carrett gave it to Frederick Hodges of the Lon-
don Distillery, under whose ownership it acquired its gay
reputation and name. Filled with sporting characters, it was
run at night in defiance of the authorities and in this way is
said to have traveled about eight hundred miles in Kent and
Surrey. After being summoned for excessive speeds, the
owners equipped it with fire hose and gave their passengers
brass helmets to wear, escaping in this way arrest at the
hands of village constables. At length it was necessary to
convert the Fly-by-Night into a slower-moving vehicle.
Evolution of Self-propelled Vehicles 21
The advance of the mechanical arts in England during
these trying years may be briefly indicated by listing four
quite startling innovations. In 1833 Richard Roberts of
Manchester applied differential gearing to a steam car-
riage, which solved, in accordance with modern practice, the
turning of corners, thereby escaping the necessity of having
one wheel running loose on the turn, which could hardly
be considered safe.
Far ahead of its time was William Barnett's contribu-
tion to the internal combustion engine. In 1838 he invented
a double-acting gas engine. Its single cylinder was vertically
placed, and explosions occurred on either side of the piston.
Another astonishing invention, considering the fact that
the self-exciting dynamo was not invented until 1871, was
the electric vehicle produced by Robert Anderson of Aber-
deen, Scotland, in 1839, apparently the first electric vehicle
in the world. His carriage was driven by a primitive
electric motor consisting of bars of iron on a drum. These
were drawn around by electro-magnets, "probably on the
principle of some old toys which had a star wheel to pro-
duce the necessary make-and-break." Gibson thinks it was
dependent upon intermittent primary cells.
England pioneered also, in the development of pneumatic
tires; at least, Robert William Thompson was the first to
make a clear patent specification of the pneumatic principle.
In the field of the explosive engine France assumed the
lead after 1860, when Lenoir of Paris made a gas engine
more practical than Barnett's English effort of twenty-two
years earlier. Lenoir made history by igniting his explosive
mixture with a spark produced through the use of an
electric battery and an inductive coil. His engine started
easily and was fairly quiet. Used to drive lathes, printing
presses, and water pumps, it was the first gas engine to come
into commercial use. In 1862 Lenoir placed one of his gas
engines in a vehicle and, using street gas for fuel, success-
fully drove from Paris to Joinville-le-Pont but was always
handicapped by low speed and a narrow range of action.
The British, clinging manfully to steam in spite of the
legal restrictions which pressed upon them more and more,
created some notable machines in the decade of the 'sixties,
22 The Turning Wheel
being encouraged somewhat by the hope of export trade and
the fond expectation that the road restrictions would be
eased in their favor. Instead, however, the restrictions were
tightened.
American interest lagged through the middle period, but
Richard Dudgeon of New York built a steam carriage
Richard Dudgeon's steam carriage, New York, 1860
which richly deserves notice because of its unusual span of
life. Put into storage in 1866, it was resurrected in 1903
and even then ran at ten miles an hour.
The early evolution of the steam car has been traced, and
notice taken of the creation, almost stillborn as far as its in-
fluence on inventive activity is concerned, of the first electric
vehicle. To these two grand divisions a third was destined
to be added and eventually to triumph over the others in
popular approval and use. This was the car using petroleum
or one of its derivatives which, after many trials, developed
into the gasoline car of the present.
Various steps in the evolution of the internal combustion
engine have been cited. In 1866 Otto and Langen of
Evolution of Self-propelled Vehicles 23
Germany opened wide the door to the evolution of the
modern high-speed engine by inventing their famous gas
engine, a comprehensive improvement on Lenoir's, since it
used only one half the fuel of its predecessor. In 1867
Otto and Langen were granted United States patents on
improvements on three kinds of combustion engines : a two-
cycle non-compression engine, a two-cycle compression
engine for which the mixture was compressed outside the
cylinders, and a four-cycle compression engine. The last
named is the one of historic importance, as its cycle of
charging, compression, explosion, and expulsion is still
adopted. It was carried along from gas to oil by Gottlieb
Daimler, an associate of Otto and Langen, whose petrol
motor was the first to be manufactured in quantity.3
Nearly twenty years were required for Daimler to evolve
his 1885 petrol engine from Otto's gas engine of 1866 but
in the meantime inventors elsewhere were busy in other
directions. Todd of England built a small steam carriage
for two passengers. In the same year Charles Ravel of
Paris attempted to propel vehicles with gas motors, and in
this country Austin constructed a small car in Massa-
chusetts which was exhibited along the Atlantic seaboard.
A year later, in 1871, Dr. J. N. Carhart of Racine, Wis-
consin, built a steam buggy, certified to by J. D. Donald,
Secretary of State of Wisconsin, under date of December
14, 1914. Dr. Carhart was assisted by his brother, H. S.
Carhart, Professor of Physics at Northwestern University
and later at the University of Michigan. Compared with
the foreign machines of the same period the Carhart
vehicle must be rated as a rather crude product. In par-
ticular, it revealed the curse destined to beset American
inventors for many years to come — that of viewing the
"horseless carriage" as the only escape from the horse
itself. For at least twenty years more, American inventors
in the self-propelled vehicle field would be trying to fit
engines into carriages of the general type and style to which
3See Chap. Ill for a further discussion of the evolution of gas and oil
engines.
24 » The Turning Wheel
their prospective buyers were accustomed, instead of
evolving designs better suited to carry their power plants.
The Carhart experiments seem to have aroused great
local interest, for in 1875 the Wisconsin Legislature passed
an act appropriating $10,000 as a bounty for the invention
of a steam road wagon which would meet certain tests as
to performance and durability. This act was amended sev-
eral times, but $5,000 was actually awarded in 1879.
In the 'seventies France began to move definitely toward
assured leadership. In Paris Amadee Bollee built a number
of steam omnibuses which enjoyed a long and profitable
life. Other French achievements of the late 'sixties and
early 'seventies are Tellier's ammonia engine, and the com-
pression (not internal compression, however) motors of
Brothier and Carre. Tellier received a United States patent
on an ammonia engine for road work in 1871.
Siegfried Markus of Vienna, at an isolated point as re-
spects the art in general, constructed a petrol car, but some
doubts are expressed by Lavergne and others that it ever
ran. Markus is sometimes credited with building the first
automobile in 1869; elsewhere the date is given as 1877.
Like so many other claims to first position, this one would
seem to rest on a narrow definition of the word "automo-
bile," yet even that word had not yet been invented. His
experiments, however, no doubt stimulated the activities of
men in more favorable locations.
In 1876 George B. Brayton, an Englishman living in
Boston, exhibited a petrol engine at the Philadelphia Cen-
tennial which attracted a good deal of attention, as it
seemed to represent a distinct advance in American eyes.
Described in the Encyclopaedia Britannica as the first engine
to use "fuel oil under compression instead of gas," in the
end it proved to be inferior to the four-cycle engine then
being developed by Daimler in Germany. Its chief sig-
nificance for us lies in the fact that George Baldwin
Selden, a patent attorney and inventor of Rochester, New
York, whose keen mind foresaw a demand for small self-
propelled vehicles using oil fuel, also perceived in what way
the basic difficulties involved could be solved. Selden sent an
agent to Philadelphia to study Brayton's engine and, on the
Evolution of Self-propelled Vehicles 25
basis of using a similar engine as motive power, drew up the
specifications which accompanied his application May 8,
1879, for the famous Selden patent which was finally
granted to him in 1895.
The evolution of self-propelled vehicles has been traced
from the first mention in history down to the year 1879, a
dramatic date in the American automobile industry. Steam,
the first motive power of artificial origin, came close to
successful application on highways in England before being
blocked by adverse legislation. The distant beginnings of
the internal combustion engine and the beginnings of the
evolution of the oil or gasoline engine by descent from the
gas engine, have been noted. While it is impossible to
allocate credit accurately, the names of the chief contribu-
tors are here recorded.4
These individuals and many others worked in an atmos-
phere beset by difficulties to an extent which moderns can
scarcely comprehend. Under the circumstances, the wonder
is not that it took centuries to master the art of propelling
wheeled vehicles by power plants, but rather that the in-
ventive spirit persevered in these men so strongly that the
evolution of the motor car proceeded as swiftly as it did.
Many of them sacrificed their fortunes as well as their lives
to the great task of advancing in some degree man's mastery
over space and time.
The inventors of the 'seventies could see that the rail-
roads, despite their enormous gains in mileage, speed, and
dependability, had not solved the transportation problem.
Tied to tracks of steel, the railway lacked the flexibility
necessary to make rapid transit available on the highways
leading everywhere. Away from the rails, land transport
was still geared to the horse, as it had been from the days
of the Pharaohs. Goods moved swiftly by rail from depot
to depot, but away from depots to consumer they were sub-
ject to the ancient lag of the Dark Ages. In particular, rural
America lay in a quagmire of mud at certain seasons, and
even under good weather conditions its beauties could be ex-
plored by few city dwellers. Vast regions where railroading
4For other significant dates and names in the evolution of self-propelled
vehicles, see Appendix I.
26 The Turning Wheel
could not hope to pay a dividend remained in a backward
condition, almost untouched by the forces of progress which
steam locomotion had brought to the more favored areas.
The railroads also had created a serious social problem
not foreseen in the early stages of their development. The
advantages which they offered for residence and manufac-
turing could be reaped only near their stations and par-
ticularly at junction points. As a result, cities grew to
enormous size, were densely overcrowded, and slum life
became an appalling reality. To relieve the congestion
which rail transport had created, other rail systems — first
cable cars and later electric trolleys — were placed in opera-
tion on city streets, but these were never entirely effective
because they reproduced, in a small way, the same influences
which the railroads brought into the situation in a larger
way. Suburbs so served were strung out thinly along lines
of transit with large open areas between them.
The man of 1879 could see, as the man of 1829 could
not see, that humanity needed more than ever a mode of
transportation more flexible than anything tied to rails and
faster than the horse. The railroad had extended tremen-
dously the range of the individual and the productivity of
society, but clearly it did not satisfy completely the instinc-
tive demand of mankind for greater freedom of action and
a wider radius of effective toil, trade, travel, acquaintance-
ship, and understanding.
In the Lynds's Middletown, the most complete picture of
the evolution of an American community, an old man who
had entered Indiana on an ox cart is quoted as saying that
he can put the cause of social change in his day in four
letters — "A-U-T-O." The gasoline automobile in 1879 made
its first appearance in American history, not as a practical
vehicle, but as a definite, compelling, and driving idea under
the spell of which many men would labor shrewdly and de-
votedly to compass its reality.
Chapter III
THE FORMATIVE PERIOD: 1879-1899
A
I/THOUGH American inventors hopefully built steam
carnages of strange design at intervals from 1800 on, it
remained for George Baldwin Selden in 1879 to catch the
first confused vision, on this side of the water, of the
modern gasoline motor car. A shrewd lawyer, Selden kept
his application alive from 1879 until 1895, when he secured
a sweeping patent — under which millions were collected from
automobile manufacturers until, in 1911, its broad scope
was limited and held not infringed by the actual types of
motor vehicles then in use. (Columbia Motor Car Com-
pany vs. C. A. Duerr & Co., 184 Fed. 493.) All General
Motors cars until then were manufactured under licenses
from the Association of Licensed Automobile Manufac-
turers having been formed to exploit the Selden Patent. The
litigation ending this monopoly is the most famous in Ameri-
can automobile history.
The period from Selden's application of 1879 to tne
founding of Olds Motor Works in 1899 measures the birth
pangs of the gasoline automobile in America. At the begin-
ning of that period the French were leading the van of
automotive progress; at its close America had caught up
and was poised for adventure in quantity production.
Economic needs have a way of permeating society, so
that it is a commonplace of the history of invention to find
minds far distant from one another in time and space,
wrestling with the same problems and independently pro-
ducing results roughly identical. In the long and intricate
27
28 The Turning Wheel
evolution of the automobile this was many times the case.
Advances in other mechanical arts had to be tried and
tested by time before they could be adapted to transporta-
tion. The older industrial countries necessarily provided the
background for the beginning of the automobile's march
to assured success.
Since the internal combustion engine is the heart of the
modern automobile, its development is of prime interest.
The chief American name is that of Drake, who in 1855
introduced incandescent metal as an ignition agent for
gaseous mixtures. Lenoir's double-acting gas engine, fired
by an electric spark, came into practical use. Four hundred
of these engines were in use in Paris in 1865. They were
quiet and smooth in action but expensive in fuel consump-
tion. With the year 1867, when Otto and Langen intro-
duced their free-piston engine at the Paris Exposition, the
gas engine approached full utility. By 1876 Dr. Otto had
applied the cycle of operations proposed earlier by de
Rochas; this cycle, now known as the Otto cycle, was
worked out independently because de Rochas never brought
his ideas to execution, and in the meantime practical dif-
ficulties in the way of completion along his lines had been
overcome.
The affinity between gas and oil engines is, of course,
close, the vapor being produced from oil in the latter in-
stead of being present as constant gas as in the former.
The first practical oil engine is credited to Hock of Vienna
in 1870, but his product was not a commercial success. Bray-
ton's oil engine, working on the constant pressure system
without explosion, is said to have been the first of this type
to use oil instead of gas.
It seems impossible to determine precisely who first used
an oil fuel to drive a motor vehicle. Gibson, a considerable
authority, says that Lawson of England invented an engine
in 1880 which was driven by the explosion of gas prepared
from gasoline stored in a receptacle carried on the vehicle,
which was a tricycle. Worby-Beaumont is inclined to credit
the priority, at least as far as actual propulsion of a vehicle
by an oil motor is concerned, to Edward Butler, who in-
vented a three-wheeled motor tricycle, the Petrocycle, using
The Formative Period
29
benzine or benzoline. This machine was invented in 1883,
proved in 1884, and exhibited in 1885. The motor had
double-acting cylinders coupled direct to a single power
wheel, and burned vapor of benzoline, which was exploded
electrically. A three-wheeled oil motor carriage by Knight
is said by some English authorities to have been the first
First motorcycle — oil motor
oil motor carriage actually to run. At first benzoline was
used as the fuel, but later the engine was adapted to ordi-
nary lamp petroleum.
In France the early 'eighties saw the earnest efforts of
a few petrol enthusiasts to enter a transportation field
where steam-power vehicles were at their highest stage
of development under the leadership of Comte de Dion and
his associates, Bouton and Trepardoux, later manufactur-
ing as De Dion, Bouton & Cie. The further progress of
steam was assured when Leon Serpollet, in 1888—89, in-
vented his "flash generator," the capillary water boiler
known by his name. This improvement gave steam a new
lease of life on highways, and led to the use of smaller
30 The Turning Wheel
steam cars of which, during the next decade, the White
and Stanley were the first American examples.
In 1883, Delamare-DeBouteville, borrowing an idea
from Lenoir, constructed a gas tricycle which used illu-
minating gas. A year later DeBouteville joined with
Malandin in building a petrol car which the French claim
was the first to operate.
The year 1885 furnishes material for what is still a
bitter controversy, with traces of nationalist feeling as be-
tween France and Germany. In that year Gottlieb Daimler
invented his famous petrol engine in which the vapor from
oil was burned in the same cycle worked out by Otto for
his gas engine.
With Gottlieb Daimler's appearance in the internal com-
bustion field we approach the significant application of the
internal combustion engine to the differentialized wheel-
and-axle, which has given us the modern motor car. Until
1883, when Daimler conceived the construction of small
high-speed engines with light moving parts, the various oil
and gas engines were of heavy construction, rotating at
150 to 200 revolutions a minute. He attained 800 to 1,000
revolutions a minute without great sacrifice of durability
and smoothness.
The French, however, have put forward the claim of
Fernand Forest, a humble but excellent mechanic, who
built a four-cylinder motor in 1885. The 1885 motors of
both Daimler and Forest seem to have done excellent work,
but Daimler's came into commercial use in 1890 when 350
were manufactured and, throughout, Daimler was far more
influential than Forest. The latter deserves, however, an
honorable niche in the annals of automobile invention, not
only for the work he did on motors, but also for the im-
provements which he made in carbureters. Apparently
without question he should be credited with the first water
jacket constructed to warm the carbureter.
In Germany, Daimler's chief rival was Carl Benz, who
put out a gasoline tricycle in 1885 which, like all of Benz's
work, was strongly built and satisfactory in use. He seems
always to have been a little ahead of Daimler in putting
the gasoline engine into road work, for in 1886 he matched
The Formative Period 31
Daimler's "bone-shaker" with a car containing several
highly progressive features — a device allowing variable
speeds and an automatic control of the gas supply through
a clutch lever operating a stop-cock. This car developed
fifteen miles per hour. The Benz car of 1886 is sometimes
spoken of as the first gasoline motor car, but this can
hardly be taken literally, although it was certainly a great
advance on its predecessors in design and dependability.
Daimler soon followed with a four-wheel motor car, but
his first efforts in that direction were not as successful as
those of Benz. There seems to be no clear warrant for
the statement of the Encyclopaedia Britannica that Daimler
"ran for the first time a motorcar propelled by a petrol
engine." Daimler certainly had the correct motive means
well in hand by 1883, even if he did not apply it to a motor
car until 1886.
Daimler's light and fast engine thrust itself through the
field of invention as an earthquake heaves a new mountain
into view. M. Levassor, of Panhard & Levassor, secured
the French patent right from Daimler and, in adapting it
to highway use, fixed many of the trends which have made
the automobile what it is today. The influence of cycle
design on the French inventive mind freed French inventors
from the obsession of carriage design which dominated
early American and English efforts — the stagecoach in
England, and the buggy in America. Levassor placed his
engine in front, with the axis of the crankshaft parallel to
the side members of the frame.
The drive was taken through a clutch to a set of reduction gears and
thence to a differential gear on a countershaft from which the road
wheels were driven by chains. With all recent modification of
details, the combination of clutch, gear-box and transmission
remains unaltered, so that to France, in the person of M. Levassor,
must be given the honor of having led in the development of the
motorcar.
This solemn verdict of Encyclopaedia Britannica seems en-
tirely justified. America's early effort to use the Daimler
engine in automobiles was made by William Steinway on
32 The Turning Wheel
Long Island in 1888. Steinway secured the American
rights and spent large sums on mechanical equipment, but
had little success.
To this preeminence of France in the history of effective
motor-car design certain conditions which America at that
period lacked were contributing factors:
1 I ) A magnificent system of highways which encouraged
travel, especially cycling, which in turn led to an efficient
machine-shop industry.
(2) An open and friendly attitude on the part of the
French population and authorities which permitted those
highways to be used without legal restrictions such as dis-
couraged experiment and adaptation in England.
(3) The approval by wealthy French sportsmen and
aristocrats, who from the beginning gave the automobile
both financial and moral support.
In England the development of self-propelled vehicles
had been greatly retarded by adverse legislation and the
hostility of the population. Here in America it was re-
tarded by wretched highways, the indifference of finan-
ciers, and to some extent by the hostility of the public,
particularly of the farmers who were later to become the
chief beneficiaries of the flexible transportation. Also, the
hard times of the early 'nineties introduced a discouraging
economic factor into the American situation.
For these reasons and others, America lagged behind
Europe during the important ten years following the
French application of Daimler's engine to road transport,
but nevertheless there had been substantial American prog-
ress. Through the growing use of stationary internal com-
bustion engines, and the design and manufacture of marine
engines, both American inventors and a portion of the
public worked slowly toward the predestined goal. The
American vehicles which took the road were chiefly pro-
pelled by steam, and down to the late 'eighties they showed
little if any advance over English "steamers" of a much
earlier day.
A direct result of English influence would seem to be the
four-wheeled steam car produced by John Clegg, an excel-
lent mechanic, English born and trained, and his son,
The Formative Period 33
Thomas J., in the village machine shop at Memphis,
Michigan, which the younger Clegg still operates. Thomas
Clegg describes this vehicle as driven by a single cylinder,
steam being produced in a tubular boiler carried in the rear
of the car. It had seating capacity for four persons, includ-
ing driver and stoker. Cannel coal was the fuel. Leather
belts were used to transmit power, and spring adjustments on
them provided enough play to let the car negotiate corners.
R. E. Olds's first horseless carriage (steam) , constructed 1886—87
This machine is significant as the first self-propelled
vehicle on record as being built in Michigan, now and for
many years the leading state in the Union in the manu-
facture of automobiles. The reasons for Michigan's rise in
the automobile world will be examined later. The great
drive of the Wolverine State to leadership in the industry
presently would begin, but the Clegg "steamer" neverthe-
less created hardly a ripple of excitement beyond a twenty-
mile circle of rural countryside which it disturbed with its
journeys through its short life of six months. Built in the
winter of 1884-85, it ran perhaps five hundred miles in
some thirty tests during the succeeding summer, its longest
trip being to Emmet and return, a distance of fourteen
miles.
34 The Turning Wheel
In 1887 Ransom E. Olds, who with his father Pliny Olds
was engaged in manufacturing gasoline engines for farm
use, drove on the streets of Lansing, Michigan, a three-
wheeled steam vehicle. Two years later he brought out
another "steamer" with a vertical boiler. The Olds steamers
will be discussed later.
The three-cornered struggle between oil-and-gasoline,
electricity, and steam was being waged all over the world
and would not be settled for another fifteen years. No-
where was it waged more hotly than in America. Each of the
three types had its advantages and disadvantages. Steam
gave smooth acceleration, but it carried the handicap of de-
lay required for generation beside the difficulty of carry-
ing enough fuel for a long trip. Electric propulsion meant
quiet and ease of operation but had the disadvantages of
extreme weight, limited radius of operation, and long waits
for battery charging. Oil or gasoline as fuel meant a quick-
starting vehicle and large reserve power in comparison to
weight, yet the early vehicles of this type were noisier and
more complicated in their operation than the others. While
they possessed a wider range of action and more adapt-
ability to road conditions, these could not always be realized
on because of mechanical difficulties. They did possess, how-
ever, two supreme advantages which tended, as design im-
proved, to give them supremacy. The fuel they used was
rather widely distributed from the start, and this distribu-
tion could be and was easily expanded, so that nearly every
country store could become a supply station for motor cars
as soon as demand increased. And, secondly, they could
be built at a price to fit a wide range of pocketbooks, a
fact of supreme moment in those early years when the
measure of transportation investment was the cost of buy-
ing and maintaining a horse and carriage.
In 1890 the Olds Gasoline Engine Works, parent com-
pany of the oldest unit of General Motors, was incorpo-
rated at Lansing, Michigan, for $30,000. The experience
of R. E. Olds in producing gasoline engines there would
turn him soon toward automobiles so driven. For the
present, however, Mr. Olds continued his experiments with
steam power. In 1891 he produced the steam horseless
The Formative Period 35
carriage with a float boiler, which machine he sold to India,
thereby consummating the first recorded sale of an Amer-
ican self-propelled vehicle.
In spite of "hard times," or perhaps because of the
adversities of those times, inventors in transport every-
where were busily at work bringing out novelties which
R. E. Olds' s first factory, River Street, Lansing, Michigan
soon were recognized as significant. In 1891 Thomas B.
Jeffrey patented the clincher rim. In the following year
Charles E. Duryea and his brother Frank built and ran at
Springfield, Massachusetts, the first successfully operated
American gasoline car.
This car is preserved in the Smithsonian Institution. The
date given is 1892—93; apparently the car received pre-
liminary road trials in 1892 but was not definitely intro-
duced to the public until 1893. It weighs 700 pounds, is
propelled by a 4 horsepower motor weighing 120 pounds
and is fittingly described as a "horseless buggy." It set a
style, as well as inaugurating an industry. America was so
thoroughly a horse country, back from the railroads, that
for years American manufacturers favored carriage styles.
It is said that the first body delivered to Packard was
equipped with a whip-socket.
Acutely aware that the American market did not want
power cycles, American producers followed Duryea's ex-
ample of the "horseless buggy," paying little heed to the
36 The Turning Wheel
lead given by Panhard & Levassor in Paris in creating a
design fundamentally different from both cycle and car-
riage. Levassor revealed the full possibilities of present-
day automobile design in which a style carriage is moved
by a power plant placed ahead of it on a chassis, but Amer-
ican manufacturers for years to come would still be re-
producing buggies as closely as possible and hiding their
power plants in narrow spaces beneath the seats. Of course,
Panhards were expensive; perhaps no country lacking a
rich and sporting aristocracy such as that of France could
have provided a broad enough market for them. In Amer-
ica the inventors strove from the first for cheaper cars, and
while their initial designs were faulty, their goal was one
which has been realized so fully that the automobile is in
possession of the common people here to an extent matched
nowhere else in the world.
Elwood Haynes in 1894 and R. E. Olds in 1895 pro-
duced gasoline-powered cars, the latter the forerunner of
the famous curved-dash runabout which in a few years was
destined to become the first American car produced in quan-
tity. The two-seater Oldsmobile in the National Museum,
while highly interesting as a specimen car of the times
(1897), lacks commercial significance, as it was the only
one of its kind produced.
Automobile interest the world over was tremendously
stimulated by the first Paris— Rouen race for motor cars in
June, 1894, and the Paris— Bordeaux race the following
year. One result of these races was the filing of 500 appli-
cations for patents on all varieties of self-propelled vehicles
at the United States Patent Office. In the 1898 race, the
winning Panhard covered 726 miles at an average speed of
fifteen miles an hour.
America owes its initiation into automobile racing and
red-hot automobile news to H. H. Kohlsaat, publisher of
the Chicago Times-Herald, who offered prizes for the first
motor vehicle contest ever held in America. After being
postponed, the race was finally run at Chicago on Thanks-
giving Day, 1895, under road conditions which provided
a stern test for the entrants. Snow and slush filled the
streets, which were soon churned into "a slough of mud"
The Formative Period
37
by the narrow tires of the competing vehicles. The storm
gave the public excellent proof of the superiority of gaso-
line-power over horses, steam, or electricity. The winning
Duryea "horseless buggy" covered the 54.36 miles of the
muddy course in seven and one half hours, despite stops
and accidents which caused sixteen miles of extra travel.
The horseless buggy, one of Charles E. Duryea s first vehicles, l8g3
Noteworthy is the fact that although all three motive
powers — steam, electricity, and gasoline — contested, the
gasoline cars were most numerous and finished one, two, and
three. Morris & Salom's famous Electrobat, though given
a prize for the best showing in. preliminary tests, could
not cope with the harsh weather and severe going. Duryea's
victory and the good, showing of other gasoline-type cars
helped to fix in the American mind the truth that the most
flexible and dependable automobile, in all weathers and on
all roads, was the gasoline car.
38 The Turning Wheel
So impressed was the race's sponsor by the achievements
of the day that he declared his faith that, in five years more,
Chicago streets would show five automobiles for every
horse. Thanks to the Chicago race the American auto-
mobile had been launched as "news," and it has continued
to be news ever since.
In both the Times-Herald Chicago competition, and the
French races of the 'nineties, gasoline cars had proved their
superiority over both steam and electric automobiles in
those qualities most suitable to the American scene. They
started more quickly than steam cars and could deliver more
power per pound than the electrics. Since the fuel they
consumed could be found at almost any country store, their
cruising radius was limited only by the condition of the
roads, and the difficulty of making repairs when wear and
tear proved too much for their mechanisms. All in all, the
"horseless buggies" of the 'nineties were seen to be rough-
and-ready performers capable of meeting the severe tests
of wretched American roads well enough to augur their
future ascendency.
In England, Wallis-Tayler might say that steam would
eventually carry the day against gasoline and electricity,1
but America even then was engaged in a fury of develop-
ment destined to overturn his solemn verdict. Between 1895
and 1900 top speed for gasoline cars rose from fifteen
miles an hour to nearly fifty, and problems of supply and
repair were being solved. Many companies had sprung up,
searching for the key to market success.
Looking backward, it is easy to see the main outlines of
their merchandising problem, but to the pioneer companies
the situation no doubt had its puzzles. There was an avid
public interest in the new means of transport, but the
country was still depressed as a result of the bitterly hard
times of the early 'nineties. As cars one by one appeared,
they were bought by rich folk of a sporting and adventurous
1<(There can be little doubt that the vast majority of people would prefer
a smooth-running, reliable steam engine for use as the propelling medium
of a pleasure or light business carriage, to the evil smelling, dangerous,
wasteful, and at best uncertain and unreliable engine heretofore chiefly em-
ployed for that purpose in motors of recent construction." A. J. Wallis-
Tayler in Motor Cars or Power Carriages for Common Roads, 1897.
The Formative Period
39
turn of mind who sometimes used them ruthlessly on the
highways, rousing the opposition of pedestrians and horse
drivers, whose steeds were affrighted by the noisy novelty
of the few cars they met. Unless automobiles could come
into common use, so that an individual of average means
could look forward to possessing one in the future, there
was danger that the small boy's "Get a horse" would be
translated into restrictions of the sort which had blasted
English enterprise two generations before.
"Horsey* Horseless Carriage" designed by Uriah Smith of Battle
Creek, Michigan, to keep Dobbin from shying on the road
The extent of this hostility against automobiles in the
late 'nineties, especially marked in the rural sections, can
be indicated by relating the fate of the first motorcar
introduced into South Dakota. This was a "home-made"
horseless wagon planned and assembled by Louis Green-
ough and Harry Adams of Pierre, using a two-cylinder
Wolverine gasoline motor and a special Elkhart wagon,
in which the engine was housed under the rear seat and
power transmitted by chains to the rear axle. It could carry
eight persons and altogether was a competent vehicle, which
that then frontier state might well have been proud to wel-
come as a home product. But such was the public opposition
that Greenough and Adams were refused the right to carry
passengers for hire at county fairs, which was their only
40 The Turning Wheel
prospect of securing prompt returns on their investment.
At Mitchell they were refused permission even to bring
their machine inside the town limits. The Press and
Dakotan voiced the public verdict when it said: "It is a
dead moral certainty that that infernal machine will frighten
horses and endanger the lives of men, women, and chil-
dren. "2 So the checkmated pioneers of motoring gave up
their efforts at a time when it was painfully clear to them
that motor cars would be an unmixed blessing in that state
of vast distances. Like hostility manifested itself in many
other parts of the country.
Obviously, this popular distrust of the motor car had to
be overcome, and the way to break it down was to make
automobiles so common that thousands could drive them
and more thousands ride in them daily; then horses and
humans alike would grow accustomed to their passage;
then the farmer and the working-man alike would learn to
look upon the automobile, not as a rich man's toy, but as a
convenience which he might hope some day to possess. The
conversion of the populace would begin as soon as any con-
siderable number of car owners started taking their neigh-
bors for rides. After even one ride the small boy would be
on fire to own a car when he grew to be a man.
Quantity production, it is now clear, was the key not only
to the financial success of the industry but also to winning
the public mind away from its traditional enmity. Only
through quantity production of a single model would costs
be reduced sufficiently to bring the automobile within reach
of the average American. A car so produced had to be
small and strong and simple. The first manufacturer who
could bring a car of that kind to the public "at a price"
would score an immediate financial advantage and at the
same time clear the way for the whole industry to surge
toward large proportions.
The first company to take that most important step was
the Olds Motor Works, the oldest unit of the General
Motors Corporation, with its curved-dash runabout. The
evolution of that car and of the company which produced
it appears in the next chapter.
^Encyclopedia of South Dakota.
Chapter IV
OLDSMOBILE: FIRST "QUANTITY" CAR
A
s THE twentieth century drew near, the prospect of
high fortune for those manufacturers who could build
automobiles in quantity rode scores of ambitious men like
a witch, stirring them to extraordinary efforts, sleepless
nights, ceaseless planning. Their customers, the devoted
"automobiliers" as the phrase of the day ran, were scarcely
less excited. They had endured the jibes of a prejudiced
populace; many of them had. been denied the use of streets
and highways and had cheerfully braved arrest to win
freedom of movement for their fellows, as Dave Hennen
Morris and Augustus Post had. done in Central Park, New
York City. Bold citizens who caught a glimpse of the future
not only braved the clutches of the law and the wrath of
mobs; they also did volunteer publicity work for the cause
of motordom. Mr. Post was one of the leaders in. this field,
assisting in organizing and publicizing many historic con-
tests, including the famous Glidden tours, carefully planned
long-distance endurance runs, annually featured from 1905
to 1911, for a trophy presented by C. J. Glidden of Boston.
Foreign observers returned to praise American initiative.
In London, John Munro describes the encouragement given
to motor-car manufacturers in France and concludes that
the French army will soon be motorized. With clairvoyant
sense, he foresees the "tank": "We are in a measurable
distance of the ironclad on shore." England was awakening
from lethargy caused by earlier legal restraints; London,
41
42
The Turning Wheel
he observes, has an Automobile Club, to match those of the
United States, France, Germany, Austria, Belgium and
Italy; while an American, James Gordon Bennett, has pre-
sented a cup to the Automobile Club of France, to be com-
peted for yearly by cars representing clubs from both sides
The Glldden Trophy
•
of the ocean, the first race to be held in France in mid-
summer, 1900, over a course of 550 to 650 kilometers, in
150 kilometer stages. The French Academy had even in-
vented an enduring name for the self-propelled vehicle —
"automobile."
American developments might be praised by foreign
writers but the American reporters on the state of the art
were a little apologetic. Writes Ray Stannard Baker in
McClure's for July, 1899:
Never before has Yankee genius and enterprise created an important
business interest in so short a time. And yet the motor vehicle in
Oldsmobile 43
America is in its babyhood. . . . Here it has hardly passed the
stage of promotion and promise.
Notwithstanding this modesty, the achievements re-
corded in the same article might be considered excuse for
letting the eagle scream:
Five years ago there were not thirty self-propelled carriages in prac-
tical use anywhere in the world. A year ago there were not thirty
in America. And yet between the first of January and the first of
May, 1899, companies with the enormous aggregate capital of
$388,000,000 have been organized in New York, Boston, Chicago
and Philadelphia for the sole purpose of manufacturing these new
vehicles.
At least eighty establishments . . . 200 types of vehicles, with
nearly half as many methods of propulsion.
A motor ambulance is in operation in Chicago ; motor trucks are
at work in several cities; a motor gun carriage will be ready for
army use in the summer.
The Santa Fe railroad has ordered a number of horseless coaches
for an Arizona mountain route.
A trip of 720 miles has actually been made in a gasoline carriage
(Cleveland to New York), and an enthusiastic automobile traveler
is now on his way from New England to San Francisco.
Through most of the articles of the time runs the horse
motif. Some might lament his passing, as Chauncey M.
Depew did in Horseless Age, 1899: "As to the ordinary,
everyday horse, he is certainly doomed." Of course Mr.
Depew put no time limit on his prophecy and it may yet
come to pass, but on the record Dobbin has outlived the
magazine containing his sentence of doom. Other writers
rejoiced in the prospect of clean, horseless streets. The
statisticians of the new industry worked out the compara-
tive costs of hay and gasoline, harness and tires. Their
general conclusions, that motors were as economical as
horses, seem a little over-optimistic when one observes their
neglect of depreciation and replacement, which was then
even more of an item than at present.
The truth that here was a new transportation tool and
not merely an improvement on the horse, had not dawned
44 The Turning Wheel
even on the industry itself. Its leaders thought of the auto-
mobile as making headway only through putting horses out
of work, whereas the fact is that the number of auto-
mobiles increased many times before the horse population
showed signs of falling off. What happened was this: a
more efficient use of human time lifted the productivity of
the country, bettered man's economic life, and increased the
wealth of the nation, so that the new means of transport
more than paid its way without prematurely displacing the
equipment already available.
Even the motor poets were obsessed by the horse; a
popular verse in praise of the motor-car, declared:
It doesn't shy at papers as they blow along the street;
It cuts no silly capers on the dashboard with its feet;
It doesn't paw the sod up all around the hitching post;
It doesn't scare at shadows as a man would at a ghost;
It doesn't gnaw the manger and it doesn't waste the hay.
Nor put you into danger when the brass bands play.
These are virtues, but after all they are negative virtues.
The qualities which gave the automobile a chance to enter
quantity production, after its long experimental evolution,
were positive virtues — power to carry persons and goods
faster than they had ever been carried on highways since
the dawn of time, ability to overcome bad highways until
better ones could be built, resistance to shock and stress,
high mobility in rural areas where speed had never been
applied before, saving precious time, widening the individual
radius of action, making groups more effective and co-
hesive, life more various, thrilling, and productive. These
advantages were destined not only to substitute the auto-
mobile for the horse on highways, but also to change Amer-
ica into a nation of travelers moving on ever improving
highways at an ever increasing tempo toward wider and
wider horizons, higher and higher standards of living.
Public interest was rising: how could it be maintained,
exploited, brought to bank? Through lower prices, obvi-
ously. Yet costs and prices could only be reduced by increas-
ing volume. But who dared to commit himself to a quantity
Oldsmobile
45
production program which would absorb all one's capital
and wreck its originator if the goods could not be sold?
There seemed no escape from that circle except gradual
enlargement of volume, an opinion expressed by one of the
most ardent automobile advocates, W. H. Maxwell, Jr.,
in Metropolitan Magazine for November, 1900. To grasp
R. E. OLDS
Father of the Oldsmobile
the opportunity required high courage; to win the leader-
ship required shrewdness as well. There was only one man
in America who, in 1899, refused to wait any longer for
the "gradual enlargement of the volume of business."
While others pushed on bit by bit, Olds Motor Works made
the leap into the dark.
Their take-off for the great leap was Detroit. Various
explanations have been given for Detroit's position in the
automobile world, but the one that seems conclusive is this :
In Detroit, the Oldsmobile early proved a money-maker;
46 The Turning Wheel
hence, the pioneer manufacturer could find capital support
there easier than elsewhere.
To accomplish quantity production under reasonably
good management was to reap profits. Nothing else serves
to commend an industry to a community as swiftly as a
good earning record. Detroit early became automobile-
minded, and for that the City of the Straits has the Olds
Motor Works to thank, since it was the Oldsmobile which
demonstrated before any other American car that auto-
mobiles could be made and sold in quantity, and fortunes
reaped from their manufacture. Once that demonstration
had been made, Detroit put its money on the automobile,
and in so doing began its population climb from the eleventh
city in the United States in 1900 to the fourth city in 1930.
Another factor in Michigan's development as an auto-
mobile center was its location on navigable water. Olds,
Buick, and Leland — three pioneers of the industry — made
gasoline engines for marine use before turning to produc-
tion of motor cars.
Bringing Oldsmobile to Detroit was in itself the result of
capital investment built upon an astonishing faith in the
new vehicle of transportation, and in a wealthy old man's
confidence in a young man, poor in purse, but rich in ambi-
tion and practical ideas.
The young man was Ransom E. Olds, born in Geneva,
Ohio, in 1864. With his father, Pliny S. Olds, a competent
mechanic, he came to Lansing, Michigan, and though little
more than a lad worked in his father's machine shop in
River Street, where among other products was developed
a gasoline engine for farm and marine use. By the time he
was twenty-one R. E. Olds had saved $300, and putting
that into the business, along with a note for $800 at 8 per-
cent interest, he became a half-owner of his father's busi-
ness. In 1892 he bought out the balance of his father's
interest and incorporated the Olds Gasoline Engine Works
for $30,000, S. L. Smith being a considerable stockholder.
Two ideas possessed Olds. One was to improve the gaso-
line engine : to that end he invented a new type which drew
gasoline directly into the cylinder. It has since been dis-
carded in favor of engines using air-and-gasoline mixtures.
Oldsmobile 47
No matter: Olds was on his way. The other idea was that
of putting power behind wheels. In 1887 he had produced
and driven down the streets of Lansing a three-wheeled
steam-power horseless carriage, arising early to avoid
shocking the citizens and scaring the horses. Lansing was
then the quiet capital of an agricultural state. The city's
population was only 2,000; there were no paved streets,
and there were those in the community who objected to
having their roads used by horseless carriages.
Olds went on from his three-wheeler to other steamers
of the more practical four-wheel type, reaching depend-
ability in that field in 1893. One of his steamers, equipped
with a flash boiler of Olds's designing, became known all
over the world through an article in the Scientific American,
so that its fame reached even to India, resulting in its sale
to the Francis Times Company of Bombay, India — cer-
tainly the first sale of an American self-propelled vehicle
for export and perhaps the first American-made passenger
car usold for value." This transaction antedates by at least
five years the Winton sale usually listed as the first Amer-
ican sale of an American motor car, and in the meantime,
Duryea had probably sold some of his "horseless buggies."
As we have seen, a number of steam cars had been pro-
duced in the United States earlier, but no authentic record
of a bona fide earlier sale than this one is available.
A Lansing lad, by name Roy Chapin, later a notable
figure in the automobile world and Secretary of the United
States Department of Commerce, running after one of
Olds's vehicles then and there decided that he wanted to be
an automobile man. The same decision was being made by
thousands of the most progressive youths of his generation.
A little later they would be found energizing the young
industry with their superb vitality, until the "automobile
game" became the phrase describing the business in its
most energetic and resourceful stride.
But after all, young R. E. Olds's experiences with steam
were a side issue. His livelihood and his dearest dreams
were centered in gasoline engines. After four years of
struggle with debt, he finally stood clear with enough work-
ing capital to feel safe. The business prospered enough to
48
The Turning Wheel
First Oldsmobile, 1897, now on display at Smithsonian Institution,
Washington, D. C.
afford a margin to finance experiments. While these ran
chiefly to steam, it was inevitable that a manufacturer of
gasoline engines would eventually abandon steam cars for
gasoline cars. In actually selling a steam car to India, Olds
foresaw market possibilities; but concluded that the future
belonged to gasoline rather than steam. As he said years
later, "The gasoline engines were our bread-and-butter
business, and most people thought the car was just a toy,
but I knew that the car was the big venture."
This reasoning was built on hard experience with steam
cars. He knew that boiler troubles would eliminate the
"steamer" as a popular favorite, as soon as gasoline cars
could be simplified. While inexperienced in electrics, he
realized they could not cope with the wretched roads of
the American countryside; and, hence, could not capture
the market which arose in his imagination. So he set to work
to apply the gasoline engine to road transportation, as sev-
eral others were doing in other parts of the country.
Oldsmobile
49
Facsimile of minutes of directors' meeting, August 21, 1897,
authorizing construction of first Oldsmobile
Olds worked hard to get a car ready for the Chicago
race, but failed to complete it in time. However, he states
that it was finished before the end of 1895, and adds these
details: "This car had high wheels with one-and-one-half
inch rubber tires. The engine formed the reach and was
carried on the running gear."
The work of putting Michigan on the automobile map
as the first quantity producer of gasoline cars began in 1895
with Mr. Olds as the chief figure, somewhat assisted by
Frank G. Clark, whose father owned a Lansing carriage
factory. Mr. Clark, interviewed in 1922, states that he and
Mr. Olds worked together on the first Oldsmobile which
appeared in 1897 and is now in the Smithsonian Institution
at Washington. This car was the fruit of two years of ex-
periments conducted chiefly after their regular hours of
labor. Mr. Clark claims to have built the body, and testifies
that the front axle was made in the carriage shop and that
he and Mr. Olds worked together on the spring suspension
and drive. The correctness of this narration at all points
50 The Turning Wheel
is questioned by Mr. Olds, but the appearance of Mr.
Clark's name as the owner of 127 shares in the company
which Mr. Olds soon formed to promote the new car, in-
dicates that there was collaboration of a fruitful kind.
However, Mr. Clark soon left the venture, and to Mr. Olds
goes the credit of making a commercial success of the enter-
prise, as well as for the mechanical excellence of the early
product, with the financial assistance of S. L. Smith.
Once the experiment gave assurance of success, Olds
organized, with the assistance of bankers whose good-will
he had earned by his all around dependability, the Olds
Motor Vehicle Company, Inc., with a capital of $50,000
divided into 5,000 $10 shares. Ten thousand dollars had
been paid in when the papers, dated August 21, 1897, were
filed on September 9, following. The purpose of the com-
pany was stated to be "to manufacture and sell motor
vehicles." At the first meeting of the board of directors,
as recorded in the minutes, Olds was empowered to "build
one carriage in as nearly perfect a manner as possible."
The 1897 Oldsmobile on display in Washington is the
oldest General Motors car in existence. It carried four
persons, on two seats, both facing forward. The famous
curved-dash had yet to make its appearance, the dash on
the 1897 model being angular and clearly of buggy origin.
This car is the only one of that model and year, as Olds
Motor Vehicle never reached a production basis. However,
the car ran, and ran remarkably well considering the handi-
caps its young inventors labored under, more than thirty-
five years ago.
Among the stockholders of Olds Motor Vehicle was
S. L. Smith, a copper magnate of Detroit. Mr. Smith de-
serves to be remembered as the first man of large means to
peer into the future of Michigan automobile production,
catch a glimpse of its possibilities, and finance a new venture
in a large, vital way. When the Olds Motor Vehicle Com-
pany was later united with the Olds Gasoline Engine Works
to form the Olds Motor Works, S. L. Smith's name led all
the rest in capital contributed, and he remained a power
in the company until his death. The Olds Motor Works
came into being as a result of his backing.
Oldsmobile 51
For some time Mr. Olds had realized that Lansing, as
it stood in the late 'nineties, was not a practical location
for a large manufacturing establishment. There were not
enough skilled machinists and not enough houses to accom-
modate an influx of new inhabitants. The Lansing bankers
already interested in Oldsmobile pulled wires in the East,
and sites were considered as far away as Newark, N. J. But
when it came down to cases, Eastern capital still fought
shy of automobiles. On the way home, therefore, Mr. Olds
stopped in Detroit to discuss the situation with Mr. Smith,
already one of his stockholders. The old but vigorous mil-
lionaire, desirous of entering his sons, Frederic L. and
Angus S. Smith, in business careers, advised locating in
Detroit and backed his advice with enough cash to settle
the issue.
The Olds Motor Works was promptly incorporated for
$500,000 on May 8, 1899, "for the manufacture and sale
of all kinds of machinery, engines, motors, carriages and
all kinds of appliances therewith." The place of operation
was designated as Wayne County, Michigan, with offices
in Detroit. The capital stock was $500,000; 50,000 shares
at $10 par. The record shows that S. L. Smith held 19,960
shares of the 20,000 originally issued and paid in, the other
four shareholders, Olds and Sparrow of Lansing, James
Seager of Hancock, Michigan, and F. L. Smith of Detroit,
holding ten shares each. The new company acquired all the
assets of Olds Motor Vehicle and the original Olds Gaso-
line Engine Works of Lansing, Olds Motor Vehicle being
discontinued February 29, 1900.
In some sources the capitalization of 1899 is placed at
$350,000 with $150,000 paid in, but the records of the
Secretary of State must be accepted. The difference may be
that between shares authorized and shares sold, a residue
of $150,000 being then unissued. Later distributions of
stock to the shareholders of the original company gave
Mr. Olds and his associates substantial holdings.
Mr. Smith's wealth and reputation drew in other influen-
tial Detroiters. The Company gained the assistance of
Henry Russel, one of Detroit's most famous attorneys,
who became a large stockholder. The company built on
52 The Turning Wheel
Jefferson Avenue East, near Belle Isle Bridge, where the
Morgan & Wright plant of U. S. Rubber is now located,
First factory erected in United States for automobile manufacture.
Olds Motor Works plant, Detroit, Michigan, begun 1899
the first American factory especially designed for auto-
mobile production. Of his early trials in Detroit, let Mr.
Olds testify :
It was our plan at that time to put out a model that would sell for
$1,250. I had fitted it up with some very up-to-the-minute improve-
ments— pneumatic clutch, cushion tires, and electric push-button
starter. We thought we had quite a car, but we soon found that it
was too complicated for the public. That first year we ran behind
about $80,000.
The prospects of the industry were not very bright. Winton was
making some cars down at Cleveland, Ohio, and Duryea, Haynes,
and Apperson were all in the market. But the public persisted in
the idea that it was not a practical proposition and would be a
thing of the past within a year or two.
Finally, after a long sleepless night, I decided to discard all my
former plans and build a little one-cylinder runabout, for I was
convinced that if success came it must be through a more simple
machine.
It was my idea to build a machine which would weigh about 500
pounds and would sell for around $500. The result was the curved-
dash "Oldsmobile," weighing 700 pounds and selling at $65O.1 My
*First priced at $600; soon raised to $650. Five electric cars were built
and sold in 1899 and 1900.
Oldsmobile 53
whole idea in building it was to have the operation so simple that
anyone could run it and the construction such that it could be
repaired at any local shop. We rushed a few of them out as fast as
possible, and they tested out so well I decided to put them on the
market immediately.
We sold 400 the first year, which, was considered a wonderful
achievement for that period. Having felt our way carefully, I
decided that the only plan to recover from the slump we had had
the first year would be to come out with an announcement that
the following year we would build 4,000 machines. I thought this
would restore confidence in the industry and I staked all on the
success of my plan.2
There is an element of luck in most successes, and what
seems bad fortune at one time may become the basis of later
triumph. Something like that came to pass in the fire which
destroyed the Olds plant on March 9, 1901. One of the
workmen at the new factory pulled his forge underneath a
gas bag; the gas caught fire, and in an hour the plant was
in ruins. But Fate, in the person of James J. Brady, a young
timekeeper who was later to become one of Detroit's lead-
ing citizens, rushed in and rescued the only curved-dash run-
about that had been built. It was the one tangible asset left.
There was no good in going on with the other models; they
vanished from the Olds list overnight. Most of the patterns
for the new runabout had been burned, but new patterns
were made from the rescued car. Just a month after the
fire the Olds force had constructed a new runabout and
drove it to the hospital where Mr. Olds lay ill. Before
the end of the year, more than 400 of the famous runabouts
had been built and sold.
The fire crisis in Oldsmobile history had another effect on
General Motors history. To hasten the resumption of pro-
duction Oldsmobile contracted with the Leland-Faulconer
Company to make 2,000 motors for the runabout, thus in-
troducing the Lelands into the automobile business and
turning their thoughts in a channel which led directly to the
creation of the Cadillac.
2Sketch of R. E. Olds by O. D. Foster in Automotive Giants of America.
B. C. Forbes Publishing Co., New York, 1926.
54
The Turning Wheel
The production figures of Oldsmobile one-cylinder
curved-dash runabouts are, in round numbers: 1901, 425;
1902, 2,500; 1903, 4,000; 1904, 5,ooo.3
In addition, 6,500 one-cylinder straight-dash runabouts
were built in 1905. No other automobile production record
Detroit to New York in seven and one half days
ROY D. CHAPIN in Oldsmobile, igoi
of the period approached this one, in its early achievement
of quantity production. In 1902 when Olds was building
and selling 3,299 cars, and when he could have sold 4,000
if suppliers had been able to fill his orders, less than 1,000
automobiles were registered in New York, the richest and
most populous state in the Union. Among the leaders in the
New York list were Oldsmobile, Locomobile, Mobile,
Winton, de Dion, Columbia, and Gasmobile. No Fords, no
Buicks, no Cadillacs, and no Oaklands as yet.
figures are agreed upon by Messrs. F. L. Smith and Roy D. Chapin.
For 1901 and 1902 they differ somewhat from figures on unit sales as fur-
nished by Olds Motor Works, perhaps because marine and farm engines,
made in both Lansing and Detroit, may have been included as "pieces" in
unit sales. \
Oldsmobile 55
Oldsmobile sales in New York City took a great surge
forward after the second New York automobile show in the
autumn of 1901, to which Roy D. Chapin, then a tester
for Olds (he would presently be sales manager), drove a
curved-dash runabout from Detroit. This was the first
Detroit-New York trip made by a light car.
Well equipped with spare parts when he left Detroit,
Chapin needed most of them before he reached his destina-
tion, as the wretched roads he traveled almost shook his
light car apart. He was forced to leave the muddy high-
ways, and drive along the towpath of the Erie Canal, con-
testing with mule teams for the right-of-way. His night
stops were Leamington and St. Catharines in Ontario, Ro-
chester, St. Johnsville, Hudson, and Peekskill, New York.
He lay up for major repairs at Peekskill, and drove into
New York seven and one half days after leaving Detroit.
On his way down Fifth Avenue the runabout skidded into
the curb, damaging one of the wire wheels, in spite of which
he made his haven at the hotel where Mr. Olds was anx-
iously waiting. The doorman would not admit the young
man in his greasy garments, and Chapin had to find his way
around the building and sneak in unobserved through the
servants' entrance to find his employer.
A good deal of social history is compressed in that in-
cident— the contrast between the formal East and the free-
and-easy Middle West, the tremendous urge and surge of
young America — typified in a youth of twenty-one attempt-
ing something that had never been done and being trusted
by his elders to "put it over."
As a commercial venture the drive was a decisive success,
achieving wide publicity which enabled Mr. Olds to make
a contract with Ray M. Owen to sell 1,000 cars in New
York City. Detroit's sales drive on the rich New York
market had begun.
Detroit occupied no prominence in the industry until the
Olds Motor Works announced a production of 4,000 cars
in 1902. In that year, Detroit's first automobile and sport-
ing goods show was held. Olds displayed a car already
56 The Turning Wheel
popular while the Henry Ford Automobile Company dis-
played a Ford-Tom Cooper racer never successfully brought
into production.
Mr. Ford, years afterward, stated that he had been ex-
tremely lucky in his competitors — they had left him prac-
tically alone in the field under a thousand dollars.
"Within a few years," said Mr. Ford, "Olds, Hupp,
Buick, and E.M.F. got out of my way, one by one, in
something like that order. All of them went into larger
cars after making a success of small ones. I recall looking
at Bobby Hupp's roadster at the first show where it was
exhibited and wondering whether we could ever build as
good a small car for as little money."
The trend of early manufacturers toward large cars
can be explained as due partly to the desire for more
power and easier riding on the abominable roads of the
period and partly to the desire of manufacturers to be
represented in the market by something dignified, costly and
well designed. At any rate, Oldsmobile production in 1903,
the year in which the Ford Motor Company was organized,
was 4,000 cars, by far the largest production schedule of
any American manufacturer. A clear priority on quantity
production belongs to Oldsmobile.
This outstanding achievement by no means reflected
merely good fortune. Partly, of course, it was due to the
fact that, underneath the hostility of many persons and
sections, there existed real need for automobiles and an
intense interest in them. Still, the business had to be pushed
through sales and advertising pressure, and there were
grave manufacturing difficulties to be overcome owing to
the imperfections of materials and the haphazard processes
of that day. Mr. Olds was a fortunate combination of
commercial sense and general mechanical ability, but he
was not a precisian when judged by latter-day standards.
His big job was to get goods to market; the whole success
of his venture depended on that, and he took what would
now be considered a rather rough-and-ready view of en-
gineering research. He told Roy Chapin once that it was
time to correct a fault when the fault made itself evident
on the road. There was no time in those hectic days to set
Oldsmobile 57
up an engineering system which would refine the car in
advance of need or consumer interest.
Even on this dot-and-go schedule, extraordinary strength
and durability marked the Oldsmobile curved-dash run-
about. We have seen that in 1901 Oldsmobile was the
first light car to make the rough passage from Detroit to
New York. In that same year Milford M. Weigle and
F. L. Faurote introduced into the United States postal
service a wire-wheeled Oldsmobile runabout which is said to
be the first gasoline car used in any postal service in the
world. It carried mail on contract under tests so success-
fully that a fleet of Oldsmobiles was soon being used for
that purpose. Credit for initiating this idea of the auto-
mobile in postal delivery belongs to H. H. Windsor, editor
of Popular Mechanics and the R. F. D. News, who invited
F. L. Faurote, then advertising manager of the Oldsmobile
works, to address the annual convention of rural letter
carriers at Indianapolis in 1906.
Mr. Weigle's reminiscences are one of the best records
of early Oldsmobile achievements on track and road. In
1902 he won the blue ribbon for piloting an Oldsmobile in
the first hundred-mile non-stop endurance race staged in
this country. Between 1902 and 1904 he won three gold
medals and twelve silver cups, and hung up in succession
several world's records for light cars on dirt tracks. He
recalls being arrested three times for driving sixteen miles
an hour on Broadway, New York City, when the speed
limit was fifteen miles an hour. In the endurance race of
1902 at Chicago, any driver who made a speed greater
than fifteen miles an hour was disqualified.
In 1903 the Oldsmobile Pirate established a world's
straight-away record for making five miles in six and one
half minutes. A little later, H. T. Thomas drove the same
car to a new mile record — the first American car and driver
to cover a mile of space in less than a minute. In that year
Oldsmobile won the Tour de France.
Perhaps the most successful of Oldsmobile's efforts to
make America automobile-minded was the cross country
race of 1905 from New York to the Lewis and Clark
58 The Turning Wheel
Exposition at Portland, Oregon, where the good roads con-
vention in the United States was also to be held. The drivers
contested for the honor of performing the first transcon-
tinental journey across America in a light car and for a
prize of $1,000 offered by the company. The story of that
adventurous journey is one of the liveliest in American
motoring records.
The cars left New York City May 8, 1905, driven by
Dwight B. Huss and T. R. McGargle. Each car carried
a mechanic who assisted in the driving, Huss' assistant
being Weigle, an Oldsmobile driver and inspector for many
years. His log book shows Old Scout pulling into Portland
on June 21, after forty-four days on the road for a total
of 4,400 miles and an average of one hundred miles a day.
Some 350,000 persons witnessed the triumphant arrival of
the victorious car which had not only traversed rain-soaked
stretches of gumbo and stormy mountain passes, but had
also ploughed through trail-less wastes. When Old Steady,
delayed by even worse conditions on another route, ap-
peared a few days later, the staunchness of Oldsmobile was
demonstrated beyond all doubt.
In the same car, equipped precisely as before, Mr. Huss
repeated his New York to Portland journey twenty-six
years later, in 1931, this time continuing on down the
Pacific Coast. On Old Scout's second expedition across the
continent he found hard-surfaced highways in place of
mud and cattle trails, supply and service stations every-
where along the line, and a rousing welcome. Ten million
persons, it is estimated, inspected the ancient Oldsmobile,
which was displayed under the auspices of every major
automobile club along the route. Old Scout continues in
service. A feature of the opening of the building erected
by General Motors for the Century of Progress Exposition
in Chicago was the appearance of Mr. Huss once more at
the tiller of this famous runabout, which he drove from
Lansing to Chicago, carrying a letter from the Governor
of Michigan to the Governor of Illinois.
From overseas comes the tale of an even more ancient
Oldsmobile owned by the famous Krupp family of Ger-
many and still in service. Efforts to secure this veteran for
Oldsmobile 59
exhibition purposes in Europe have failed; Krupps keep
it "on the job." Other distinguished patronage came as
soon as it was seen that a quantity production and low price
were not incompatible with quality. Among early buyers
were the Queen of England, the Queen of Italy, Sir Thomas
Lipton, Mark Twain, Chauncey M. Depew, Maude Adams,
and other celebrities in all walks of life. But even more
important was the certainty that the common people were
being initiated into the idea that the automobile was here
to stay. The country doctor drove an Oldsmobile on his
rounds, giving more prompt service and extending his effec-
tive range. The more progressive country merchant went
to call upon his scattered customers in an Oldsmobile, and
kept a barrel of gasoline handy to sell to other motorists.
Farmers began to lose their hostility to the new mode of
transportation as they saw more cars, and rode in them
occasionally. When a single company could make and sell
more than five thousand cars in a year, as Olds Motor
Works did in 1904, it was clear that America was on its
way to becoming the motorized country in which a pedes-
trian came to be defined as a person on his way from one
motor car to another.
Under the conditions of the period, the infant industry
might very well have come to grief financially, since banks
were cautious, and some even hostile, toward the new in-
dustry. Olds Motor Works survived by putting the first
quantity trade in automobiles on a cash or C.O.D. basis.
Of its firm stand on credits, John K. Barnes says:
. . . the industry profited greatly by it. [Olds] explained to his
agents that it was also to their advantage to get their money
when they delivered the cars. Then the purchasers, he pointed out,
would be more careful how they used the cars ; they would not run
them into the ditch when something went wrong and telephone the
agent to go get the car. That is one of the reasons why the in-
dustry as a whole has come through past periods of business de-
pression with little difficulty.
The Company had a care, too, for the consumer, not
merely as a prospect but also as a user after the sale had
been made, a point of view then new to business but one
60 The Turning Wheel
that has been followed consistently by the whole automobile
industry, with an emphasis on "service" conditioning the
whole relationship of the manufacturer and the market.
One of the first of these service efforts was the famous
Oldsmobile "Don'ts."
Finding it necessary to instruct the uninitiated, Olds-
mobile issued these "Don'ts," the mere recital of which
indicates the abysmal ignorance of the 1900 public on things
motor-wise :
Don't take anybody's word for it that your tanks have plenty of
gasoline and water and your oil cup plenty of oil. They may be
guessing.
Don't do anything to your motor without a good reason or with-
out knowing just what you are doing.
Don't imagine that your motor runs well on equal parts of water
and gasoline. It's a mistake.
Don't make "improvements" without writing the factory. We
know all about many of those improvements and can advise you.
Don't think your motor is losing power when clutch bands need
tightening or something is out of adjustment.
Don't drive your "Oldsmobile" 100 miles the first day. You
wouldn't drive a green horse 10 miles till you were acquainted with
him. Do you know more about a gasoline motor than you do about
a horse ?
Don't delude yourself into thinking we are building these motors
like a barber's razor — "just to sell." We couldn't have sold one
in a thousand years, and much less 5,000 in one year, if it hadn't
been demonstrated to be a practical success.
Don't confess you are less intelligent than thousands of people
who are driving Oldsmobiles. We make the only motor that
Early Oldsmobile advertising reflected the manufacturer's
natural desire to convince a nation of horse drivers that his
product could be used as cheaply and generally as the older
means of transportation. Illustrations frequently showed
automobiles passing horses on hills, and elaborate tables of
figures were presented to prove that automobiles would
not reduce to insolvency a buyer accustomed to the upkeep
of horses and carriages. Gradually the automobile men
Oldsmobile 61
forgot the horse. Oldsmobile advertising began confidently
to sound the message of the automobile for its own sake.
Oldsmobile "firsts" include:
The first steps in modern assembly line development by
improved system of routing materials in process.
The first automobile manufacturer's house organ —
Motor Talk.
The first automobile dealers' house organ — The Olds-
mobile News Letter.
The first national convention of dealers gathered by an
automobile manufacturer, held at Lansing, 1907.
The first comprehensive instruction books to users.
The first sales manual to dealers.
Among the newspaper and publicity men often at the
Olds plant, and helpful in getting the Oldsmobile firmly
entrenched in the public mind were Alfred Reeves, now
general manager of the National Automobile Chamber of
Commerce, John P. Wetmore, then automobile editor of
the New York Mail, Joe E. G. Ryan of the Chicago Inter-
Ocean, Edward Westlake of the Chicago Evening Post
and C. G. Sinsabaugh, then editor of Motor Age, and
later of Motor, Motor Life, American Motorist and Auto-
motive Daily News. These and other automobile editors
and advertising men organized "The Goops," an informal
organization whose publication Goop-Talk was financed by
the Smith brothers of Olds Motor Works. Oldsmobile al-
ways enjoyed a good press. Several famous advertising men
took the Oldsmobile's message to the public, among them
A. D. Lasker, later head of the Shipping Board, George
Batten, Charles Brownell, and E. H. Humphrey.
In the first automobile copy to appear in the Ladies Home
Journal — a one-column Oldsmobile advertisement — Olds-
mobile is described as "The Best Thing on Wheels":
The ideal vehicle for shopping and calling — equally suitable for a
pleasant afternoon drive or an extended tour. It is built to run and
does it.
Operated entirely from the seat by a single lever — always under
instant control. The mechanism is simple — no complicated ma-
chinery— no multiplicity of parts.
62 The Turning Wheel
A turn of the starting crank and the Oldsmobile "goes" with
nothing to watch but the road.
Price Including
Mudguards $650.00
Each part of the mechanical marvel is made from thoroughly tested
materials of the highest grade. Built in the largest Automobile
factory in the world by the most skilled motor specialists and
guaranteed by a firm whose twenty-three years in Gasoline Motor
and Automobile Construction stand as the very highest guarantee
of mechanical perfection.
While the story is well known in the automobile trade,
the general reader may wonder why Oldsmobile forsook its
position as the outstanding leader in quantity production
to enter into the manufacture of larger and finer auto-
mobiles. Several versions are available, but the true one
seems to be this: R. E. Olds never possessed control of
the company bearing his name. As he explains it, the younger
Smiths, lacking in the experience gained from hard knocks,
wearied of making cars for the masses. They desired to
branch out in the direction of larger and more luxurious
cars, forsaking the humble curved-dash runabout with its
established market, for a more ambitious program. It is
only fair to state, however, that the Messrs. Smith foresaw
strong competition in that field from the rising Ford enter-
prise and also anticipated some of the trends toward the
more elaborate engineering of the future which would soon
render the simple Oldsmobile of the Detroit era a thing of
the past. At any rate, a division of opinion arose as a result
of which Mr. Olds retired. He had made "his million" with
almost unparalleled speed once he got under way. Only
forty-one years of age when the break came, the prospect
of a little leisure appealed to him after twenty years of
intense effort, and he retired gracefully in 1903, being suc-
ceeded as general manager by Frederic L. Smith, also an
aggressive leader.
However, Olds's reputation had reached such heights that
presently, merely for the use of his initials — R E O — he re-
ceived a large stock interest in the newly organized com-
pany of that name.
Oldsmobile
63
The Olds Motor Works returned to the place of its
birth — Lansing. Following the fire of 1901, a Lansing plant
had been set up to assist the Detroit operations. This be-
came the chief seat of activity in 1905 and the nucleus of
subsequent developments in which Oldsmobile has since
eclipsed its earlier records. Production of the famous run-
about continued but experiments in other directions indi-
cated the new management's interest in larger cars. From
1904 on Olds Motor Works pushed export trade, doing
business in Russia, England, France and Germany, and
becoming the first American automobile company to do a
quantity export business through regular dealers and direct
sales representatives.
The trend away from the one-cylinder engine of runabout
fame began promptly in 1905, with the launching of the
"double-action" Oldsmobile with a two-cylinder engine,
Famous Oldsmobile curved-dash runabout —
America's first quantity car
which instituted a steady climb toward engineering perfec-
tion. In 1906 Olds Motor Works exhibited the first medium
priced four-cylinder car offered to the public. It brought
out its first six-cylinder model in 1907 and marketed it in
1908, but the "four" remained the mainstay of production.
64
The Turning Wheel
In 1908, when the newly organized General Motors Com-
pany of New Jersey bought the Olds Motor Works, the
production was 1,055 cars> °f which 1,000 were "fours."
Clearly, Olds Motor Works during the years following
the move to Lansing had not operated as profitably as at
Detroit. Production fell from 5,000 units in 1904 to 1,055
Chauncey M. Depew, at wheel of Olds runabout, 1904
in 1908. The company owed S. L. Smith more than a mil-
lion dollars and was otherwise not in healthy condition.
When it came time to sell, General Motors is said to have
paid a million dollars for some road signs. But, of course,
the names on the road signs made the value, as the buyers
very well knew. Oldsmobile still had prestige with the pub-
lic, almost as much in 1908 as in 1905 when Gus Edwards
was moved to write his famous song — the only automobile
song which has come down to us in full flavor from those
distant days, uln My Merry Oldsmobile." A few bad years,
in which difficulties of new designs and change of location
had to be overcome, could not destroy the reputation Olds-
mobile had won for itself. The new models were intrinsi-
cally sound in design and the Olds plant was in excellent
condition. All that Oldsmobile needed, at the lowest turn
in its fortunes, seemed to be the magic touch of a salesman.
Oldsmobile 65
Oldsmobile soon speeded up to the General Motors tempo.
Olds Motor Works was the first unit purchased by Gen-
eral Motors after W. C. Durant formed his new holding
company around Buick. Official negotiations began on Octo-
ber 10, 1908, though the leaders had been talking "deal"
for some time.4 Mr. Durant's first proposal to F. L. Smith,
the Olds representative, set a price of $5 a share on Olds
stock, payable four fifths in General Motors Preferred and
one fifth in General Motors Common, other obligations of
Olds held by stockholders to be paid off in General Motors
Common at par. Olds Motor Works was to have two seats
on the General Motors directorate, and General Motors
was to name a majority of Olds Motor Works directors.
This was not accepted, but a counter proposal by F. L.
Smith on November I2th, which called for $100,000 more
than the original offer, clinched the big deal. This settle-
ment provided for the delivery of 152,530 shares of Olds
Motor Works and the claims of S. L. Smith for $1,044,-
173.89, in exchange for $1,654,293.89 in Preferred stock
of the General Motors Company of New Jersey and $i,-
152,530 in its Common stock. Three of the five Olds Motor
Works directors were to be designated by General Motors
which agreed to protect endorsers of Olds paper against
loss and to provide working capital. General Motors ac-
quired all Oldsmobile patents, chief of which were those
on tires, carbureters, and engines, the latter specified under
the names of Sintz, Richards, and Scavenger.
In the final settlement, more Olds Motor Works' shares
"having been turned over than the number specified, the
Olds Motor Works' stockholders received $1,827,694 in
General Motors Preferred, $1,195,880 in General Motors
Common, and $17,279 in cash, a total of more than
$3,000,000.
The leadership which Olds Motor Works in its early
days gave to the whole automobile industry may be meas-
ured not only in the production figures of the company
itself, but also in the school which it provided for the
budding talents of men who since have arrived at positions
of influence and power. Names once on the Oldsmobile pay
4F. L. Smith: Motoring Down a Quarter of a Century, p. 36.
66 The Turning Wheel
roll recall the romance of the motor car's early history in
Detroit and Michigan. A list of graduates from the Olds
Motor Works "would read like a roll call of the captains
of the automobile industry." In addition to those already
named, the early Oldsmobile circle included as employees
or suppliers :
Roy D. Chapin, president, Hudson Motor Car Co.
Charles B. King, said to have been the first man to drive
a gasoline car on the streets of Detroit.
John D. Maxwell, who later pioneered the Maxwell car.
Howard E. Coffin of the Hudson Motor Car Company
and the "idea father" of the War Industries Board
with his Council of National Preparedness.
H. T. Thomas, later chief engineer of Reo.
Carl Fisher, builder of the Indianapolis Speedway; de-
veloper of Prest-O-Lite Company.
B. F. Everitt, body manufacturer, and William E.
Metzger, master salesman, both later in the Everitt-
Metzger-Flanders Company.
George and Earl Holley, developers of Holley car-
bureter.
Benjamin Briscoe, founder of the short-lived United
States Motor Company.
Charles B. Wilson, Olds factory manager, organizer
and president of the Wilson Foundry Company of
Pontiac, at one time the world's largest producer of
automobile castings. Also his brother, David Wilson.
Frederick O. Bezner, R. B. Jackson and James J. Brady
who left OldsmoBile with Chapin and Coffin to found
Chalmers-Detroit, later Hudson.
Charles B. Rose, president, American La France and
Foamite Industries, Inc., New York City.
Charles D. Hastings, chairman of the Board of the Hupp
Motor Company.
John F. and Horace Dodge (Dodge Brothers).
A complete list of the Olds pioneers who now occupy
prominent places in the automobile industry would include
at least 150 names.
Oldsmobile 67
Olds Motor Works was a training school for men whose
later activities resulted in such companies as Reo, Hudson,
Chalmers, Hupp, King, Columbia, Owen Magneto, Perfec-
tion Springs, and others. Furthermore, Oldsmobile orders
for material, spread through the machine shops, body
works and supply houses, set hundreds of wideawake
Detroiters to thinking how they could supply those wants,
improve on their merchandise, and gather part of the golden
stream of profits which Oldsmobile had started in their
direction. Detroit rode to wealth and large population
down a path in the direction which Oldsmobile had indicated.
This determining influence of the oldest General Motors
unit on the geography of motordom and the industrial his-
tory of America is now clearly acknowledged. As John K.
Barnes wrote in the Motor World of April, 1921, "It was
Olds's success in Detroit that fixed the center of the auto-
mobile industry in that city." In less than three years Olds
Motor Works paid 105 percent in cash dividends and its
capital stock had risen to $2,000,000. It is equally true that
Olds Motor Works was the first to reach quantity produc-
tion by applying the progressive principle of assembly to
the manufacture of a single model gasoline-engine-driven
vehicle, and the first to popularize the automobile with the
American people, taking it from the classification of rich
man's toy to that of everyman's servant.
Chapter V
BUICK: THE FOUNDATION STONE OF
GENERAL MOTORS
HILE Oldsmobile was the acquisition by which Gen-
eral Motors first challenged the attention of the country,
Buick was the nucleus around which W. C. Durant, Buick' s
chief and one of the dramatic figures in the history of the
industry, built up the far-flung structure destined to become
known the world over as the "G. M." How he acquired
control of Buick and made it a leader is an absorbing story
which begins with David D. Buick, man of many talents.
David Dunbar Buick, whose name already had adorned
the front of more than two million motor cars when he died
in 1929, completely realized the traditional picture of the
American inventor. He was a man of brilliantly progressive
ideas, native mechanical ability, and little business caution.
Time and again, he sacrificed the certainty of present
profits to experiment expensively with new ideas. One vic-
tory gained, he was always ready to rush on to another
without consolidating the ground already carried, with the
result that his finances were usually strained and his backers
often in distress.
Men of the lovable and creative type, who sowed more
benefits than they could reap for themselves, bulk large
in the history of mechanical progress. They were scouts
on the frontier of invention in the early days of the auto-
mobile industry; they penetrated little known territory,
pointed out trails which others followed to their profit, but
not infrequently they were unable to win wealth for
68
Buick 69
themselves. Life to them was chiefly an opportunity to ex-
periment. Many men of this sort made their contributions
and were forgotten, but Buick remains fixed in the public
mind.
Mr. Buick already had one substantial achievement to
his credit when he entered the automobile field. A member
of the firm of Buick & Sherwood, manufacturers of
plumbers' supplies in Detroit, he had developed a method
of fixing porcelain on metal, which is the key to the low-
priced modern bathroom. A steady-going business man
would have realized on this manufacturing advantage by
sticking to bathtubs, but to David Buick a bathtub must
have seemed a dead and inconsequential thing in contrast
with the gasoline engines which had long engaged his eager
and inquisitive mind and which he began to manufacture
in 1900. His partner Charles Sherwood was also of an ad-
venturous turn. When Buick Auto-Vim & Power Com-
pany was established in Detroit in 1901, it soon absorbed
the resources of Buick & Sherwood in experimentation and
sales efforts.
"Auto-Vim," in the name, had significance, as David
Buick hoped to adapt an L-head gasoline marine motor of
his design to a carriage. The company made these L-head
engines for boat and farm use with some success, but their
slender profits were spent as fast as earned. Need for new
capital brought about the organization of the Buick Man-
ufacturing Company in 1902, with Mr. Buick as president,
and it was under this name that the first steps were taken
in the development of the "valve-in-head" motor. The
L-head motor was soon scrapped. in favor of the new motor.
Several excellent engineering minds seem to have con-
tributed to the early development of this famous motor,
but documentary evidence indicates that the first steps were
taken by Eugene C. Richard, an engineer born in France,
trained in Philadelphia, and connected with the various
Buick organizations for more than a quarter of a century.
A contract is in existence between Buick Manufacturing
Company and Eugene C. Richard, dated May 23, 1903,
covering his employment as "designer and inventor and
head of the 3rafting department." Under the Richard
70
The Turning Wheel
patent No. 771095 issued to the Buick Manufacturing
Company as his assignee, one of the allowed claims covered
In an explosion engine, the combination of the cylinder-head, of in-
duction and deduction valves, having their stems extending through
said head. . . .
The "valve-in-head" engine is usually associated with the
name of Walter L. Marr, who entered the Buick circle a
little later than Mr. Richard, and who rose through many
years of service to become the chief of the Buick Manu-
First Buick, Detroit, 1902
facturing Company and one of America's leading auto-
motive engineers. He it was who gave this superior motor
its distinctive name. Mr. Marr was born in Lexington,
Sanilac County, Michigan. Six years after he went to work
as an apprentice, he completed a one-cylinder gasoline
engine on the Otto cycle. He continued his experiments in
his spare time through many years, producing six different
types of motors. With this background he built in 1898 a
vehicle successfully driven by a four-cylinder gasoline engine
of his own design. It is described as having some very novel
electric ignition fixtures, including a jump spark attachment.
This first car of Marr's was built at Cleveland, then the
oil center of the country, and in it he traveled to various
Buick 71
nearby manufacturing cities to visit other designers of gaso-
line engines, chiefly of the marine type. He was developing
a car of his own when he met and became associated with
David D. Buick.
In the early part of 1903 Buick put a single cylinder
5 x 6" horizontal engine, designed by Mr. Richard, into a
chassis of his own design. A little later a two-cylinder op-
posed engine was substituted for the one-cylinder type. This
was the car that became the famous Model F Buick, after
certain changes were made in the crank case. The engine
was 4-l/2 x 5" and had its valves mounted in removable
cages in the cylinder head.
These early trials and tests took place in and around the
small factory on Holmes Avenue, Detroit, and apparently
both Mr. Marr and Mr. Richard were present. Mr. Richard
was engrossed in the power unit; Mr. Marr, in consultation
with David D. Buick on chassis and body construction and
adaptations, made many alterations preceding the trial.
Walter Marr was an extremely ingenious man in solving
last-minute problems. By the time he came to Buick he had
a .grasp on the practical difficulties involved in making a
staunch and dependable self-propelled vehicle. He had
worked diligently over the uncertain fuels of that period,
distilling his own alcohol and petrol spirits. He had designed
and made many ingenious tools by hand, and from raw
material had constructed all the engine and chassis parts
for several cars.
Mr. Richard was Marr's technical superior under his
contract, but it is unlikely that Richard could meet as well
as Marr did the problems presented by the rough-and-ready
assembly methods made necessary by the imperfect mate-
rials and workmanship of the period. At any rate, it was
not long before the positions were reversed and Marr be-
came chief engineer. In that position he clung so steadfastly
to the "valve-in-head" principles that he became the chief
figure in its future development.
Bringing the Buick car this far along had strained the
resources of Buick & Sherwood, and they had borrowed con-
siderable sums from the Briscoe Brothers, Frank and Ben-
jamin, Jr., then manufacturing sheet metal. The Briscoes
72 The Turning Wheel
took an interest in the Buick Manufacturing Company and,
assuming charge of its finances, changed the name to the
Buick Motor Car Company, in which the Briscoe holding
was $99,700 out of $100,000, as the Briscoes felt com-
pelled to assume control of all Mr. Buick's various interests
in order to protect themselves. Unable to carry the load any
longer, the Briscoes determined to sell the Buick.
The Buick Company was on the market. Who would buy
it? Remember that in 1903 the American automobile indus-
try represented chiefly hopes and dreams. A great many
persons had lost money in.it, and few had profited. Olds was
the only quantity producer and money-maker in the gaso-
line field. Leland & Faulconer had prospered, but the
Cadillac Motor Car Company was still unborn. Henry Ford
was just getting the Ford Motor Company started. Bankers
looked askance upon the industry, and there was no reason
why the investing public should risk capital on new enter-
prises of such grave uncertainty.
In the end the sale of Buick was effected largely by acci-
dent, and a freakish chain of circumstances resulted in a
startling change in the way of life for a whole section of
Michigan. Visiting relatives in Flint, Frank Briscoe heard
from Mr. Dwight T. Stone, a local real-estate man and son
of one of Flint's early industrialists, of a prospect named
James H. Whiting, who might be interested in the white
elephant that Mr. Briscoe had on his hands.
Flint was then a city of less than 14,000 inhabitants, a
pleasant county seat, located on a flat plain where two
railroads, the Grand Trunk and the Pere Marquette, hap-
pened to cross. From the standpoint of physical geography,
it held no advantages over the other county seats similarly
located in central and southern Michigan. To this day
Flint is a city whose rise to world-wide fame confounds the
economic geographers, but to one who knows its history, the
causes of that rise are evident. Flint was located at the ford,
or, as the French explorers and trappers called it, the
Grand Traverse of the Flint River, whose upper reaches
extended for many miles through one of the best stretches
of Michigan's superb pine forests. It was therefore a
Buick 73
natural site for the location of lumber mills. For a genera-
tion its river banks resounded with the whirr of buzz saws
and the stream was filled for miles with boom impounded
logs. Fortunes were made, Eastern capital was attracted,
and the citizens of Flint became accustomed to certain ideas
of which they never afterward lost sight. They saw that big
business had its advantages; they developed an extraor-
dinary pride in their community and the success of their
industries, and they stood ready to follow daring leadership.
Before lumber vanished from the scene through the de-
struction of the forests, there came to Flint a young
Canadian, William A. Paterson, to establish in 1869 the
city's first vehicle-manufacturing plant. At first Mr. Pater-
son worked at his forge as a carriage blacksmith, but one
day he threw down his sledge and decided to be a business
man instead. The carriage industry which he introduced
there grew to large proportions, as one firm after another
was founded and gradually expanded, until Flint became
one of the great centers of the country for the manufac-
ture of popular-priced vehicles. Assembly methods were
worked out which have quite a modern ring; as competition
increased in intensity, these methods were refined, until it
is possible that the Flint of 1895 led the country in the
efficiency of factory assembly. Though the frontier receded
westward and raw materials near at hand were used up,
Flint carriage companies were nevertheless able to main-
tain themselves down to the time when the automobile
ended the Horse Age.
All these vehicle manufacturers, however, saw the hand-
writing on the wall: the automobile would drive out the
horse. One of the first to recognize this was James H. Whit-
ing, president of the Flint Wagon Works, whose plant,
extensive for those days, covered part of the present
Chevrolet site in West Flint. Mr. Whiting was a cautious
man in most respects, but, foreseeing the eventual throttling
of the carriage trade, he acted with what must now be
reckoned a quite remarkable boldness. He began to look
about for a car which might become the basis for an indus-
try which would use part of his plant.
74 The Turning Wheel
Thus far Flint had had no luck whatever with automo-
biles in a commercial sense. Two of its more enterprising
citizens, Judge Charles Wisner and Dr. H. H. Bardwell,
had built experimental cars for themselves, but neither of
these gentlemen ever let business interfere with science, and
their cumbersome vehicles merely amused a populace which
thought in terms of wheels and hoped against hope for
practical results. It looked to many as if young Alexander
B. C. Hardy, who will appear in this tale later, had "hit it"
with the dashing Flint roadster, all red paint and shining
brass, which he had begun to make in a little factory down
by the Grand Trunk tracks, a factory once devoted to the
manufacture of the now almost extinct whip-socket. Mr.
Hardy had been nerved to this great adventure by a
visit to the Paris Exposition, where he saw how far French
cars were ahead of American cars. Returning home he mus-
tered a small capital and soon had a smart roadster ready
for the market. In the end, however, Hardy was forced
to liquidate, largely through the opposition he encountered
from the owners of the Selden patent. While he was oper-
ating, a frequent visitor at his shop was James H. Whiting,
and undeterred by the young man's lack of success, Whiting
kept looking longingly for an automobile to manufacture.
All through the history of American automobile manu-
facturing in its early stages, will be seen shining examples
of the courage of ignorance. Here was James H. Whiting
already well along in years, with no engineering experience
and no clear conception of the problems involved in making,
selling, and marketing automobiles. He thought that cars
could be sold by the same salesmen who went out to sell
buggies, road carts, and farm wagons. As for manufac-
turing, he would buy what was necessary, put it together,
paint and upholster the job — which was practically the pro-
cedure in carriage manufacturing. Other concerns no better
equipped than the Flint Wagon Works were building cars
in just that way, so why shouldn't the Wagon Works? In
due course, carnage firms discovered that building and selling
motor cars was an entirely different business from making
and selling carriages. The automobile business required far
Buick
75
more capital and called for standards of mechanical pre-
cision beyond anything required in the carriage tracfe, but
all that remained to be learned. By the time Frank Briscoe
wanted to unload the Buick, James H. Whiting was in a
frame of mind to consider negotiating for it. Brought to-
gether by Mr. Stone, Whiting and Briscoe quickly made a
deal whereby the Buick concern sent its car over the roads
Original Buick factory at Flint, Michigan, 1903—04
to Flint. These roads were so bad that, in order to nego-
tiate the 65 miles between Detroit and Flint, Buick and
Marr, who drove the car, had to cover 115 miles, with every
mile a test. Machinery, patterns, and dies were brought to
Flint and housed in a small, one-story building adjoining
the Wagon Works. The two concerns then formed the Buick
Motor Company.
To bind the bargain quickly, $10,000 was borrowed from
Flint banks on the endorsement of a number of prominent
citizens. Though of small proportion, this deal was a strik-
ing example of community morale in a small town. Larger
banks and endorsers elsewhere would have been more
76 The Turning Wheel
cautious, but Flint took the game with a rugged confidence.
Benjamin Briscoe, Jr., will be remembered as one of the
colorful and energetic figures in the early days of the indus-
try, and the daring promoter of the United States Motor
Company. This company was put forward as an automo-
bile merger planned to become the chief rival of General
Motors. When United States Motor Company collapsed,
Mr. Briscoe must have regretted his sale of Buick for a
song, since the Buick in the meantime had become the key-
stone of General Motors.
The original capitalization of $75,000 in Buick was
financed by the Flint Wagon Works' declaring a dividend
of $75,000 which was paid into the treasury of the Buick
Motor Company, which in return issued stock to the Flint
Wagon Works stockholders and also* to the Buick interest.
David D. Buick and his son Thomas received 1,500 shares
between them.1 The other large stockholders were James
H. Whiting with 1,505 shares, Charles M. Begole with
1,000 shares, George L. Walker, 725 shares, William S.
Ballenger with 707 shares. Mr. Begole and Mr. Ballenger
were active in the Flint Wagon Works and later in Chev-
rolet.
Buick now had a home and business management whose
caution would be likely to restrain the optimism of David D.
Buick himself. The skeleton of an organization was put
together. A three-story brick building was begun, which at
first housed all of the company's activities, but later was
used only for motor and transmission manufacture. Old
Buick No. i — sometime later called No. 2 — still has a sen-
timental attraction for now aging employees who began
their careers there. Greatly enlarged, the building has be-
come part of the Chevrolet motor plant. Sixteen cars were
built in 1903, 37 in 1904, priced at $1,200. These first
Buicks were equipped with a storm front curtain, with a
large celluloid window in it, to protect the driver.
The $37,500 set aside for development had been ex-
hausted, and loans had been made to carry on the work.
Mr. Whiting felt that a younger man was needed to master
aMr. Buick left the Buick Motor Company in 1906, two years before Gen-
eral Motors was founded.
Buick
77
this new business, with its insatiable appetite for capital and
its crying need for quick decision. By this time he perceived
clearly that the Buicks, father and son, were neither of them
business men and that their chief associates were likewise
more interested in mechanics than in profits. The need of
the moment was for a man full of energy and vision who
also possessed a keen sense of market possibilities and the
courage to think in large figures.
First Buick car built at Flint, Michigan, igos. Model A
At a meeting of carriage manufacturers in Chicago, in
1904, Mr. Whiting told F. A. Aldrich, representing the
Durant-Dort Carriage Company, of the difficulties he
faced getting the Buick Motor Company swinging market-
wise. Mr. Aldrich advised him that the man he should
interest, the one man who fitted the specifications and was
immediately available, was William Crapo Durant. "Billy"
78 The Turning Wheel
Durant was already a leader among his associates and in
the opinion of Flint. Born in Boston, December 8, 1861, he
was the grandson of one of Michigan's war governors,
Henry H. Crapo, who had brought to Flint part of the
capital amassed by his thrifty ancestors in New Bedford,
Massachusetts, where they had followed the sea as mariners
and shipbuilders to good purpose for some generations.
Originally of French stock, the Crapos of New Bedford
and Flint alike were rich, prosperous, and able.
From boyhood. uBilly" Durant's chief interest was busi-
ness. He might have gone East to college, but instead went
to work early in his grandfather's lumber business, one of
the largest of the many large lumber mills in Flint. Then,
to get more action, he branched out before the age of
twenty-one into insurance with an agency of his own. That
suited him, because insurance was something you could
go out and sell. No waiting- around for customers to
come to you, as in. the- store. An almost feverish activity
possessed him. "Billy" Durant above everything needed
action. While possessed of a notable faculty for remaining
calm in the midst of alarms, he seemed to require dramatic
tension in business. Yet he had also the power of concen-
trating intently on work.
All this both Mr. Whiting and Mr. Aldrich knew, for
W. C. Durant at forty-two was already the most talked
of man in Flint. As they discussed his availability for the
automobile business, they recalled the dramatic entry
Mr. Durant had made into the vehicle field some fifteen
years before, when he had pioneered the road-cart business
which provided Flint with its initiation into quantity pro-
duction and salesmanship. The young insurance hustler had
bought, while in Coldwater, Michigan, for $50 the patent
rights for a road cart which carried a good selling point in
its improved suspension. He took into partnership Josiah
Dallas Dort, a young hardware clerk, and the new firm con-
tracted with W. A. Paterson for 10,000 carts at $8 each.
This was an unheard-of quantity, calling upon the manu-
facturer to adjust his plant and workers to a new system
of assembly for such a large operation. But "Billy" went
Buick 79
out and made sales rapidly at $12.50. The success-, of this
flyer in road carts induced other manufacturers to follow in
that field and to bring to it and other fields large-scale re-
peat operations. Durant and Dort used their earnings to
finance the Durant-Dort Carriage Company, which swiftly
advanced to a position of acknowledged leadership in the
trade with an annual production of 50,000 "Blue Ribbon"
vehicles, high earnings, and a strong cash position, which,
as we shall see, has its bearing on the story of the Buick
and General Motors. His success in the carriage business
made Mr. Durant a millionaire before his fortieth year,
placing him in a position where an average man might have
been satisfied with both his fortune and his prestige. But
W. C. Durant was no average man; when the carriage busi-
ness settled down into stodgy matter-of-f actness, he looked
for other fields to conquer.
Thus far his natural bent toward commercial adventure
had found expression in the sharp competitive building and
selling of styled carriages, a trade wide open to the risks of
fashion. If the popular note could be struck with a buggy,
if its lines attracted rural swains or a town's social leaders,
the manufacturer drove a thriving trade. By the turn of
the century the fun was out of the carriage business.
Mr. Durant went to New York City and was studying
Wall Street and the Stock Exchange at close range about
the time that Mr. Whiting was beginning to think that the
Buick Motor Company needed a new management.
Mr. Durant came back to Flint the next summer to see
just what there was to this Buick car which the Flint Wagon
Works and James Whiting had brought to Flint. With no
technical experience of his own to guide him, Mr. Durant
applied the only test he could make, but he did so with a
thoroughness which to this day is recalled in Michigan. He
drove that two-cylinder Buick back and forth over a wide
range of territory devoid of good roads save for a few
gravel turnpikes built by toll companies. He put it through
swamps, mud and sand, and pitch-holes for almost two
months, bringing it in for repairs and consultations and then
taking it out again for another strenuous cross-country run.
80 The Turning Wheel
He had every sort of mischance chronic in the motoring of
the period, often, of course, being stalled in out-of-the-way
hamlets for lack of repair parts or fuel and oil. During
these enforced waits, perhaps in a country blacksmith shop
which some day would be a garage, this impetuous and eager
mind wrestled with the future of transportation.
The central idea of the motor car must have appealed to
his temperament, for it emphasized qualities and powers
like some of his own: speed, novelty, flexibility, the ability
to "get there." Its possibilities for salesmanship and show-
manship would also appeal to one who had proved himself
already a most successful distributor of vehicles. The motor
car, he could see, fitted the progressive American spirit like
a glove. In addition, here was a piece of merchandise that
could not be hid; the motor car would advertise itself on
the street and at the curb. Probably Mr. Durant concluded
early in these tests that if Buick was not the medium by
which he would enter the automobile trade, he would get
into that business in another way before long. But after
the car had met his severe tests, Mr. Durant looked no
further : Buick would do.
By November i, 1904, the deal between Buick Motor
Company and W. C. Durant was complete; on that day the
capital was increased from $75,000 to $300,000, repre-
sented by 3,000 shares of $100 each. Holders of the old
stock agreed to accept Preferred stock paying 7 percent
with a 25 percent bonus of Common stock. The contract
covering this agreement was drawn by John J. Carton of
Flint, for many years attorney for the Buick Motor Com-
pany. The Wagon Works stockholders agreed to accept
Preferred stock for their holdings. It was agreed that later
Buick capitalization should be increased to $500,000 and
that the Wagon Works' interest should receive $175,000.
This was done. On September u, 1905, Buick's stock was
increased to $1,500,000 — $900,000 Common and $600,000
Preferred. Mr. Carton relates that while the Buick business
was sound and there was a legitimate need for this large
capitalization, he had some difficulty finding enough assets
to justify the increase. He says:
Buick 81
In the application presented to the Secretary of State, I listed all the
assets quite generously up to the legal requirements, but neverthe-
less we were still $60,000 short, and this was taken up by the fol-
lowing item:
"Ownership of invention of combustion engine construction not
patented for business reasons — $60,000."
This schedule went through, but later attracted little attention
so that at the next meeting of the state legislature a law was passed
prohibiting the listing in such cases of any items intangible and
not subject to execution. However, it was quite important that
the company have the full amount of the stock to issue at that time,
as Common was usually given as a 25 percent bonus with sales of
Preferred. The fact that I was very well acquainted at Lansing,
the state capital, may have been beneficial in getting such a hazy
item passed.
Mr. Durant himself sold most of the stock. It is related
that at the outset he sold $500,000 worth in a single day to
his Flint neighbors. There can be no doubt that Mr. Durant
was a most persuasive salesman. An aura of success hung
around him. For more than twenty years all his undertak-
ings had profited; early in his selling campaign he had
indisputable proof that Buick was making money. Produc-
tion was steadily increasing, and he could sell every car he
produced for cash, F.O.B. factory. So keen was the demand
that his problem was not so much selling cars as finding
capital with which to erect buildings, install machinery, and
create a distributing organization so that more cars could
be built and delivered. However loyally Flint might buy
stock, it was too small a city to finance the expanding enter-
prise; Mr. Durant had to go out into the highways and
byways of Michigan for capital. In this search he was tire-
less. He saw an immense fortune, tremendous power, and a
lofty reputation as an industrial pioneer almost in his grasp
if he could only find the necessary capital.
Of course, it goes without saying that, in representing
the golden prospects of his venture to investors, faith and
sincerity accounted for his extraordinary success in getting
promotion money from individuals. He would have been
saved a tremendous amount of time and energy if he had
82 The Turning Wheel
been able to secure the services of a strong investment
banking house to dispose of his securities systematically, but
this was out of the question in that time and locality. Local
bankers helped him all they could, and his persuasive per-
sonality drew temporary aid from larger banks outside of
Flint, but what he needed was a large fixed capital invested
for a long pull, and this he could secure only through fur-
ther personal effort.
Meantime, as the builder and leader of Buick, he found
a host of problems other than financial demanding solu-
tion. Since it was early apparent that Buick's facilities in
the western end of Flint would be inadequate, offices and
assembly operations were transferred to a factory in Jack-
son which had been used by the Imperial Wheel Company.
Imperial Wheel was part of the Durant-Dort family, as
were the Flint Varnish Works and the Flint Axle Works.
The three companies had already been located in the
north end of Flint, where, with a view to future expan-
sion of these and other companies, Mr. Durant had pur-
chased the 22O-acre Hamilton farm for $22,000. Thus he
had in hand an excellent site for the expansion of Buick it-
self with adequate trackage on the Pere Marquette rail-
road, and good location as respects drainage, water supply,
and general accessibility. He planned to sell part of this
area as building lots, laying out for that purpose Oak Park
Subdivision. But of course an immense amount of organiz-
ing work had to be done on the tract and its approaches, as
well as in plant construction, before Buicks could be pro-
duced there. In the meantime the Jackson plant held the
fort while Buick motors continued to be made in West Flint.
Jackson, indeed, might have continued as the chief seat
of Buick if capital could have been found there as easily as
in Flint.
This geographic division of the business increased the
labors of the leader. We can picture Mr. Durant at this
time as a man desperately hurried, spurred by ambition and
responsibility to feats of almost superhuman endurance,
driving at breakneck speed over wretched roads between
his two plants, holding conferences, making quick decisions,
seeking out and encouraging new dealers, scouring the
WILLIAM C. DURANT
Founder of General Motors
84 The Turning Wheel
country for supplies and building plants, subduing raw land
to industrial and residential uses and feverishly seeking
new capital. This spare, small man seemed to draw upon
irresistible sources of energy. He worked more hours than
any of his employees, did with little sleep, yet came to his
labors fresh and smiling every morning. There was a gaiety
and resilience in him which overcame all obstacles. The
press began to speak of him as the "Little Giant." His wor-
shipful associates might call him "Billy," but among them-
selves they fell into the habit of calling him "the Man."
"The Man says," was the common preface as they passed
his orders along from one to the other. Sometimes "He
says" would be a sufficient indication of authority. Both
forms were proof of the loyal and willing acceptance of
that authority. He was the first among equals rather than
the autocrat, and no captain has ever been followed by more
devoted troops. The camp followers, the local public, and
the business men alike hung on his words.
One factor in developing this amazing and truly affec-
tionate loyalty was his lack of concern for individual gain,
the natural ease and buoyancy with which he played the
prince in distributing bounties. There are innumerable evi-
dences that he cared little for money for its own sake. His
own tastes were simple, he had no time to spend money;
already well off, he had serene confidence that he would
always be successful and that nothing could stop him from
amassing an immense fortune in the automobile game. I use
the word "game" advisedly: if he was not the man who
invented that adventurous expression to describe the early
activities of what has since become a most precise and
responsible business, he at least played that great game
most completely as an adventure of the human spirit.
As an example of his lavish disregard of personal gain
and his willingness to share profits with those whose back-
ing had braced him in the past, Mr. Durant is said to have
turned in to the Durant-Dort treasury at one time some
$300,000 worth of Buick stock, voted to him personally in
return for his work in promoting the company. In com-
pleting his layout for the approaches to the Buick indus-
trial site, he paid $4,000 for land offered at $1,800 simply
Buick 85
because he knew that this land as part of his grand objective
was worth that much and more. The instances of his
largesse could be multiplied indefinitely. He explained his
generosity toward Durant-Dort stockholders by saying that
he had been on the Durant-Dort pay roll during the period
in which he was organizing Buick, though the fact is that he
was drawing a merely nominal sum from his old company.
Of course, the essential fact is that he enjoyed doing these
things, and the power to do them was his compensation.
With a swift expansion program in hand and no banking
connections equal to the situation, there were times when
the good-will built up so generously brought important re-
turns in timely assistance. Mr. F. A. Aldrich, secretary of
the Durant-Dort Carriage Company for many years, shows
from his records that Durant-Dort furnished Buick with
capital in its early stages. Mr. Aldrich says :
Owing to a decreased trade in horse-drawn vehicles Durant-Dort
Carriage Company needed less capital; both our treasury and
credit were in excellent shape, while Buick needed assistance.
Hence in the spirit of "team-work" proverbial as applied to Durant-
Dort and under full recommendation of Mr. Dort, president,
we made in one way or another large investments in Buick stocks
and also later in General Motors stock. At first these stocks were
held in our treasury but later on legal advice they were placed in
my name as trustee. We made several disbursements of this stock
to Durant-Dort stockholders as dividends.
The records show numerous instances of our helpfulness. We in-
dorsed Buick paper in Chicago on one occasion, and the loan fall-
ing due at an unfortunate time, Durant-Dort had to sell Buick
stock at distress prices to pay it off. On June 4, 1906, Durant-
Dort bought $100,000 worth of Buick stock. There was a close
financial relationship between the two companies then, and it con-
tinued after General Motors was formed. On Feb. 20, 1909,
while General Motors was still in its infancy, I was authorized to
buy and hold 10,000 shares of its Preferred and Common stock.
Later, when Mr. Durant took on Chevrolet as an independent
venture, the Durant-Dort treasury furnished him funds. In fact,
within reason, our resources were always at his disposal.
The Flint Wagon Works also helped Buick get on its
feet. Five of its directors loaned the Buick Motor Company
86 The Turning Wheel
at one time $20,000 each to match an equal sum loaned to
Buick at the same time by the Durant-Dort Carriage Com-
pany. Thus in one way or another, with occasional rescue
loans and a vigorous search outside of Flint for capital,
Buick expansion was financed.
Even when allowances are made for the newness of the
automobile business and the suspicion in which it was held
by the banking world in general in those early days, it does
not appear that Mr. Durant ever quite deserved the repu-
tation for financial genius which at one time clung to his
name. Certainly, in the formative years, finance was his
weak side. While he could make money in his operations,
and raise a good deal of money by his personal force and
the confidence which he inspired, he never seemed able to
budget his operations accurately in advance and build up
reserves. His vision was always running far ahead of his
treasury, so that there was always the possibility that his
affairs would approach the ragged edge of necessity if a
turn came with an unfavorable market for his goods, or
the well-springs of capital suddenly ran dry. His inven-
tories and commitments were usually in excess of his present
power to pay, but he had an immense faith that by the
time he had to pay for them he would find the money
somewhere. Either the market would provide it or stock
would be sold; in a pinch he could go to friendly corpora-
tions or individuals. He kept the golden ball in the air by
sheer dexterity and courage through six straining years of
exceedingly rapid expansion. Looking backward upon the
activities of a quarter of a century ago it can be seen that
the notable human qualities behind this triumph also had
their defects, which eventually caused Mr. Durant's retire-
ment from the vast business which he originated. But it
can also be appreciated that his qualities were precisely
those needed to get a foundation laid with whatever tools
and materials were ready at hand. Probably no other man
could have built up Buick in four years to a point where, as
an acknowledged leader in the industry, Buick became the
rock on which General Motors was founded.
Courage is the key-word for this Buick surge to market
leadership. Buick dared to produce in large quantities when
Buick 87
most of its competitors were proceeding cautiously on re-
stricted schedules. It pioneered in the development of
attractive retail stores in large centers, and drew able,
ambitious men into both wholesale and retail selling. There,
perhaps, was Mr. Durant's greatest contribution to the
technique of automobile administration.
For a man so vastly daring it was inevitable that as Buick
production rose, further expansion should seem not only
desirable but indeed necessary. Vital supplies had to be
safeguarded both as to volume and prompt delivery. Com-
petition was then less of a wrestle for markets and more
of a race against time. The public would take Buicks as fast
as they could be turned out; delay in delivery of even a
minor part might cost a tremendous sum. Even to this day,
no automobile manufacturer controls the production chain
of all supplies from their primary forms to their incor-
poration in a completed automobile ready for the road; yet
in this industry utter dependence on certain forms of goods
was so essential that practically all the survivors in the
stern battle for existence waged during the past thirty years
are those who have been working toward self-determination,
seeking positions where their operations could not be shut
off by shrinkage of those essential supplies.
For instance, consider engines. In the early days of the
industry many automobile manufacturers bought all or part
of their power units. While these units may have been
entirely satisfactory in price and quality, nevertheless, the
automobile manufacturer soon realized that his produc-
tion schedule was at the mercy of circumstances beyond his
control. A stoppage in his supplier's plant, arising from any
one of a number of causes, tied up his own plant. This risk
being too heavy, the tendency has been for car manufac-
turers to take over engine manufacture. Some have gone a
considerable distance toward controlling supplies from raw
materials to the finished product, yet no manufacturer has
been able as yet to process all the materials used in auto-
mobiles, because of the wide range of those materials and
the special skill and large capital required to bring them into
economic use. The drift has been toward self-sufficiency, yet
complete self-sufficiency has not been attained and probably
88
The Turning Wheel
never will be. But in this evolution nearly all those manu-
facturers who depended altogether on assembling the prod-
ucts of other enterprises have either perished or have been
absorbed. The survivors are those firms which accepted the
responsibility of making for themselves goods which others
would have been glad to make for them, but which for
various substantial reasons it seemed vital to control
throughout the entire process of production and assembly.
Mr. Durant realized the value of broad organization be-
fore he entered the automobile field. The Durant-Dort Car-
1904 Buick, priced at $1,250, top and lights, $125 extra
riage Company had gone further than any of its competitors
in organizing subsidiary, or at least dependent, companies.
It had fathered companies for the production of wheels,
paint, varnish, and axles; through others it owned in whole
or in part extensive timber holdings in distant states. It was
natural that, faced with the market possibilities of the
automobile and the difficulty of securing supplies of the
right sort as required in his hot haste for action, Mr. Durant
should leap to the conclusion that he needed bmader organ-
ization than Buick, big enough to include not only other
motor-car producers but also makers of essential parts.
Buick 89
The need to control supplies was keenly felt in 1907,
when Buick, which had concentrated successfully on two-
cylinder cars, added four-cylinder models to the line. In
1908 diversification was carried even further, with two two-
cylinder models, and four four-cylinder models. One of the
latter — the famous Model Ten — started Buick on the
heaviest production it had yet known, and its success was no
doubt one of the elements encouraging W. C. Durant to
envision a General Motors. Frederic L. Smith's remi-
niscences— Motoring Down a Quarter of a Century — indi-
cate that his first talks were with Mr. Smith at Lansing,
and that the very name, General Motors, was thus early
discussed.
Flint meantime was booming as Buick drew labor from
all directions. Responding to the pull of high wages, men
hurried there from all quarters of the compass, from other
industrial cities, from the farms of southern Michigan and
the forest areas further north. Tool makers came from
Providence and Hartford. The population of the city
doubled in five years. House-building could not keep pace
with the flood of arrivals. While Buick factory No. 10, then
the largest industrial building in the world, was under con-
struction, the neighborhood resembled a mining camp. Liv-
ing quarters were at a premium; the same bed would be
rented to a night-worker by day and a day-worker by night.
Shacks, hastily thrown together to provide some sort of
shelter, housed families who were having their first taste
of prosperity. Farms were subdivided right and left,
townspeople built houses as fast as they could, spurred by
rising values as well as by public spirit. One could see all
the evidences of rapid municipal growth, the difficulties of
absorbing a large, new population swiftly into an old one.
Persons of foreign blood congregated in colonies — Polish,
Hungarian, Serbian.
What one could not see as readily, unless he knew the
Buick shops, was the terrific task which faced the Buick
organization in molding this medley of raw and transient
labor into an efficient working force, its members well dis-
posed toward one another and toward management. Flint
was an open-shop town, and that tradition, bolstered by
90 The Turning Wheel
high wages and the opportunities for advancement offered
by a new industry, held firm against the few and withal
rather weak efforts to unionize the plants. A dynamic and
dramatic leadership helped to maintain that tradition until
employee morale could be built up to a quite remarkable
peak, until men began to see that Buick, springing from the
soil of the Hamilton farm, would be an enduring institution
in whose plants they could find steady and profitable em-
ployment during normal times and which in fact proved for
years more resistant to business depression than the aver-
age manufacturing plant.
Buick in 1908 manufactured 8,487 cars, occupied the
largest automobile plant in the world, and had a net worth
of $3,417,142. It had never missed a dividend on its Pre-
ferred stock.
General Motors, immediately after its organization in
September, 1908, took over Buick Motor Company for
$1,500 cash, Common stock of $1,249,250, and Preferred
stock of $2,499,500 — a total of $3,750,250, a conserva-
tive valuation to which Buick had grown from $75,000
within the remarkably short space of four years.
Although its manufacturing processes would be consid-
ered haphazard and inefficient in the light of modern tech-
nology, they were abreast of the best practice of the
day. Buick possessed a spirit in its personnel and a reputa-
tion with the public which made it a tower of strength from
which its bold organizer, after surveying wider fields, could
advance toward his great objective — the formation of the
General Motors Company.
Chapter VI
OAKLAND AND PONTIAC: OLD AND NEW
ONTIAC, another great seat of General Motors manufac-
turing, began its industrial development as Flint did, with
the building of horse-drawn vehicles. The first Pontiac bug-
gies and wagons were built by a blacksmith named King
on the site of the present Fisher plant near Bagley Avenue.
W. F. Stewart, who later went to Flint and rose to emi-
nence there as a body-builder, bought King out and started
his career in Pontiac, later selling his site to O. J. Beau-
dette who sold in turn to Fisher Brothers. The site has a
continuous history of vehicle manufacture for more than
half a century.
Another Pontiac pioneer was R. D. Scott, a Canadian
from Guelph, Ontario, who established himself near the
Grand Trunk tracks. W. A. Paterson, pioneer in the
vehicle industry of Flint, learned his trade in Scott's shop
in Guelph, followed him to Pontiac and then went "up
country" to Flint. At first Scott's trade was altogether local,
but in 1889 or thereabout, he began to branch out with
road-carts.
Lee Dunlap, who went to work for Scott in 1889 and
continued to be a factor in Pontiac industry well into the
automobile days, explains the swing from small production
to large in the Michigan carriage field, as follows:
Until that time, carriages and wagons had been manufactured by
hand, a few at a time and a few in a place, with the result that
the costs were relatively high. In various parts of the country, it
92 The Turning Wheel
t
was discovered that through division of labor and quantity pro-
duction, costs could be greatly reduced, with the result that within
four or five years there was a considerable boom in the trade and
an almost complete stopping of custom building throughout the
country districts. An incident will serve to illustrate the trend to
larger marketing. I sold to Sears-Roebuck, shortly after they
organized in Minneapolis, the first buggy they sold by direct mail,
and within a few years, at the height of the carriage industry, every
mail brought large orders from them.
Under the encouragement of prosperity, the entire industry pro-
ceeded to overbuild. By the early years of the twentieth century,
it was quite apparent that the buggy business had seen its best
days, especially as far as Michigan was concerned. When automo-
biles were still few and far between there were other parts of the
country nearer the raw materials, which seemed to hav^ an ad-
vantage over the Michigan factories. Practically every carriage
manufacturer began to look around for some new development.
The nearest one at hand seemed to be the automobile.
Of course you and I know that there is no striking similarity be-
tween the carriage and the automobile except that both of them
travel on wheels. We had worked out a system for progressive
assembly and a quite efficient division of labor, but none of us
knew anything about machine operations, except in a very limited
way. We seldom used blue prints and close measurements were
unnecessary. Nevertheless, the automobile industry located in Pon-
tiac, entirely because Pontiac had been a city which manufactured
horsedrawn vehicles. In Jackson, Flint, and many other cities the
same tendency was in evidence. That the similarity in the two lines
was more apparent than real is proved by the fact that the car-
riage men are not now the factors in the automobile trade that
they were in the beginning, their places having been taken by men
of more engineering experience.
The largest of the Pontiac carriage factories was the
Pontiac Buggy Company, which Edward M. Murphy,
S. E. Beach, and Francis Emmendorf had incorporated in
November, 1893. Although incorporated for only $25,000
paid in, it built a factory then reckoned large on Oakland
Avenue, where the Pontiac, Oxford & Northern tracks
crossed that thoroughfare, on land now occupied by the
Pontiac Motor division.
All his old associates ascribe to "Ed" Murphy extraor-
dinary powers of organization and business drive. Born in
Oakland and Pontiac: Old and New 93
Wayne, Michigan, he climbed the ladders of success largely
by his own efforts and came early into business authority. In
1898, after the Pontiac Buggy Company had enjoyed its
share of the boom, he brought Lee Dunlap into his orbit by
establishing the Dunlap Vehicle Company, to manufacture
a somewhat lighter grade of buggies than Pontiac had built.
Mr. Dunlap came over from the C. V. Taylor organization.
Pontiac Buggy also formed the Crescent Carriage Company
in 1903. In 1904 Mr. Beach sold his interest to Mr. Murphy
and bought the latter's interest in the Crescent and Dunlap
plants, but later went back into the Pontiac organization,
remaining until the change from carnage to automobile
production. When this change came Mr. Murphy was sole
owner of Pontiac Buggy Company, but his associates had
interests in the allied carriage plants.
Not only was the carriage trade falling but also pro-
duction costs were rising, owing to the automobile manu-
facturers in Flint and Detroit drawing Pontiac's skilled
workmen away. From its beginning the automobile trade
paid practically double the wage rates customary in car-
riage production. A carriage trimmer might get two dollars
a day, an automobile trimmer four dollars for work roughly
similar. Naturally, the automobile business drew the best
workers, and the new wage standards dealt the declining
carriage trade a heavy blow.
Facing decreased production and increased cost for car-
riages, Mr. Murphy began looking around for an auto-
mobile to manufacture, or, to be more exact, to assemble
from purchased parts. He had heard of a two-cylinder car
designed for Cadillac in which the latter did not seem to be
particularly interested. Tests proving satisfactory, on
August 28, 1907, Mr. Murphy organized the Oakland
Motor Car Company for $200,000; 20,000 shares of Com-
mon stock, par $10. New money was furnished by James
Dempsey of Manistee, Michigan, a wealthy retired lumber-
man. The Murphy carriage plants were acquired by Oak-
land at various times. On September 25, 1908, the capital
stock was increased to $300,000 by the addition of $100,000
in Preferred stock.
94 The Turning Wheel
The two-cylinder design not proving highly successful,
the company brought out in 1908 Model K, a four-cylinder
car powerful for its time and underselling all competitors.
It became a hill-climbing champion, winning the Giants
Despair Climb at Wilkes-Barre and other contests at Balti-
more, Maryland; Paris, Illinois; and Jefferson Hill, Long
Island, New York. The capital outlay being larger than
anticipated, the close of 1908 saw the new venture peril-
ously close to disaster. Mr. Dunlap speaks of Oakland as
"broke" when W. C. Durant bought it early in 1909 for
his new General Motors Company, but perhaps this is
merely relative to commitments. Another source says that
the cash position of Oakland was good, capital being
doubled in a year. The production figures are 278 cars for
1908, 1035 f°r 1909^
Mr. Murphy explained to his group, some of whom
objected to. the sale, that he was selling obsolete buildings.
From Mr. Durant's side, one of the advantages was Oak-
land's organization. Like everyone else in the Michigan
carriage trade, he had a great liking for "Ed" Murphy and
probably expected that Mr. Murphy, who was still a young
man of great vigor, would become a leader in the new
"automobile game." This prospect was defeated by the
latter's early death. Other members of the Oakland group
were men who have since become important figures.
On January 20, 1909, General Motors directors author-
ized the acquisition of a half interest in the Oakland Motor
Car Company. By February 23d, Mr. Durant reported the
acquisition of 15,000 Oakland shares, also that he expected
to acquire up to 21,000 shares at $11 a share. Mr. Murphy
took stock and notes for his interest, but others had to be
paid off in cash and by June 5th the treasurer reported that
he had paid out $200,856 in cash for 18,783 shares. Hardly
was the purchase completed than Mr. Murphy passed away
and Lee Dunlap became general manager. Production
advanced to 4,000 cars for 1910, which required a heavy
plant expansion program, not without its bearing on the
financial difficulty which General Motors experienced in
the latter year.
figures furnished by National Automobile Chamber of Commerce.
Oakland and Pontiac: Old and New 95
Mr. Dunlap's narrative shows the speed at wltich any-
one who followed Mr. Durant in those days was forced to
travel :
When Mr. Durant visited one of his plants it was like the visita-
tion of a cyclone. He would lead his staff in, take off his coat, be-
gin issuing orders, dictating letters, and calling the ends of the
continent on the telephone-, talking in his rapid easy way to New
York, Chicago, San Francisco. That sort of thing was less com-
mon than it is now: it put most of us in awe of him. Only the
most phenomenal memory could keep his deals straight ; he worked
so fast that the records were always behind.
On this visit of which I am thinking, early in IQIO, I expected
he would stay several days as we were to discuss the whole matter
of plant expansion. But after a few hours, Mr. Durant said, "Well,
we're off to Flint." In despair I led him on a quick inspection of
the plant. Instantly he agreed that we would have to build, and
asked me to bring the expansion plan with me to Flint the next
day. There wasn't any plan, and none could be drawn on such
short notice, but his will being law and our need great, something
had to be done.
So I called in a couple of our draftsmen to help me and that night
we made a toy factory layout — existing buildings in one color, de-
sired buildings in another. We drew a map of the whole property,
showing streets and railway sidings, and then glued the existing
buildings to it in their exact locations. Feeling like a small boy
with a new toy, I took this lay-out to Flint and rather fearfully
placed it before the chief. I needn't have been alarmed at our ama-
teur lay-out. He was pleased pink. We had a grand time fitting
our new buildings into the picture as it was spread on his desk.
We placed those new buildings first here, then there, debating
the situation. When we agreed as to where they should go, he said,
"Glue them down and call W. E. Wood."
Mr. Wood came in after a few minutes and received an order
for their construction. In the whole history of America, up to that
time, buildings had never arisen as swiftly as those did. Con-
tractor Wood had men, materials, and machines moving toward
Pontiac within twenty-four hours, and we were installing ma-
chinery in part of the structures within three weeks. But, of course,
we could not be equally swift in paying for them. That was some-
thing else. But for the time being none of us worried too much
over that; we figured the "Little Fellow" would find the money
somewhere. Which he did, in the end, though we know there was
plenty of trouble before the bills were receipted.
96 The Turning Wheel
These early years in the automobile business were marked by tre-
mendous personal activity and a very grave shortage of capital.
Anyone going direct from the carriage manufacture to automo-
bile manufacture could have little conception of the large use of
capital required in the new field ... I was with Oakland all
through the 1910 "pinch" when the plant was frequently visited
by members of the Creditors* Committee.
Mr. Dunlap was succeeded as general manager of Oak-
land by George E. Daniels, one of the earliest associates of
W. C. Durant in the automobile business and the first
president of the General Motors Company of New Jer-
sey, holding office for a short time directly after incorpora-
tion. After resigning the presidency, which he occupied
merely as an. interim officer, Mr. Daniels remained with
General Motors having charge of Cartercar. The bankers'
reorganization placed him at the head of Oakland where
he remained until 1914.
Production rose in 1913 to a new peak of 8,618 because
of two advanced models — a fast, light "four" with an
electric self-starter, and a "six" — Oakland's first — priced at
$2,450, a moderate figure.
As part of the change wrought by W. C. Durant's return
to power in 1916, Mr. Fred W. Warner, who had succeeded
Mr. Daniels as general manager, became a vice-president of
General Motors. Under him price reductions and improve-
ments in design brought Oakland into a swift run of pros-
perity as reflected by these unit sales figures :
1916 — 27,000 cars. The v-8 introduced
1917 — 35,000 cars. The "light six" sold at $795
1918 — 30,000 "light sixes." First offering of closed cars
1919 — 52,000 "light sixes" sold on a rising market
Automobile prices reached a peak in 1920, owing to
scarcity of materials caused by war. Pioneering in the light
car field with closed bodies, was so much of a marketing
experiment for Oakland that dealers were required to take
one closed car with each carload shipped from the factory.
Now the closed car is standard and the open car the excep-
tion.
Oakland and Pontiac: Old and New 97
The post-war boom brought prosperity to Oakland, as it
did to other manufacturers. In General Motors at that time
lack of central coordination, allowing great latitude in in-
ventories and production programs, created difficulties
which as they multiplied brought the second Durant admin-
istration of General Motors to an end and a change of
management to Oakland.
After Mr. Warner resigned in 1920, George H. Hannum
served as president and general manager for six years, to be
succeeded by Alfred R. Glancy who continued in the saddle
until 1931. These were years of remarkable expansion in
the Pontiac area, the General Motors plants spreading
northward along the railway and an entire new factory lay-
out being built beyond Harris Lake in what had been open
country a few years before. During the 1920—1930 decade
Pontiac grew faster than any other industrial city in its
census classification. The acute shortage of houses, from
1919 on, led the Corporation into an extensive housing de-
velopment through the Modern Housing Corporation.
The Oakland line, after a highly successful record with
"fours," entered the usix" field in 1915, the "eight" field in
1916, and remained a leader in quantity production down to
1931, when it was discontinued. The Pontiac car, introduced
as a light, low-priced "six" in 1926, received such a warm
market welcome in the next few years that under the man-
agement of I. J. Reuter, who took hold in 1931, the huge
Oakland plant was concentrated on Pontiac production.
Pontiac appeared in 1932 with an eight-cylinder motor.
Its manufacturing operations were under the direction of
W. S. Knudsen, president of Chevrolet, from May, 1932, to
October, 1933. Mr. Knudsen at that time became executive
vice-president of General Motors in charge of car and body
manufacturing in the United States and Canada. H. J.
Klinger, vice-president and general sales manager of Chev-
rolet, was then advanced to general manager of Pontiac.
Among the innovations which Oakland-Pontiac takes
pride in originating or early adopting are oil and fuel filters,
air cleaner, crankcase ventilation, automatic spark control,
interchangeable bronze-backed main bearings, harmonic
98 The Turning Wheel
balancer, oil-tight universal joints, honed cylinders, full
pressure lubrication, and rubber spring shackle bushings.
Oakland was the first division to bring Duco-finished cars
to quantity production; the year, 1924.
The Pontiac Motor division, in succession to Oakland,
now occupies 231 acres within the corporate limits. The
experimental unit fronts on Oakland Avenue. The main
division, to the north just inside the city limits, is one of
the most advanced industrial lay-outs in the world, and
entirely new since 1927. This huge grouping is in startling
contrast to the modest factory building in which Oakland
started to manufacture motor cars in 1908, when only
50,000 square feet of space housed its initial activities.
A breezy description of how some of the burning ques-
tions connected with new car models are threshed out and
what a new model — in this case the Pontiac for 1932 — in-
volves financially is given in Fortune for December, 1931.
Perhaps the account is sufficiently accurate to give one a
general impression of what is involved in a change of
models.
The scene is a luncheon club in the Fisher Building, De-
troit, where half a hundred General Motors executives are
reported as present. The reader is supposed to be accom-
panying Mr. Richard H. Grant :
Mr. Grant's sales problem will begin with the oldest thing in auto-
mobile salesmanship: namely, the automobile. Should the 1932
Pontiac have free-wheeling? Ride control? Should the foot throt-
tle be changed at the cost of 35 cents per car ($35,000 added to
production costs) ? The Pontiac engineers have been maintaining
forty experimental cars on the road to prove these things, some of
them embodying features that will not appear until 1933 or 1934.
In the end, during the coming ten months, Mr. Reuter will have
spent $1,000,000 for research on the 1932 car, to which should be
added Pontiac's share of the research done by General Motors
Research Laboratories, by Fisher Body, by Delco-Remy (ignition)
by Harrison Radiator, by New Departure (ball bearings), by AC
(spark plugs, gauges, etc.) by Kelsey-Hayes Wheel, and by head-
light, shock-absorber, tool, and die manufacturers throughout the
land : a total research bill of $2,000,000 spent by the industry for
this car alone. After the tireless engineers have estimated the cost
Oakland and Pontiac: Old and New 99
of every one of the 15,000 Pontiac parts, and after theyliave sub-
mitted blue prints to George Christopher, in charge of Pontiac
manufacture, Mr. Reuter will find it necessary to spend $1,400,000
in retooling for this model, and the retooling of Fisher Body will
cost that unit $1,000,000 more. New machinery will cost Pontiac
$300,000 and to revamp the floor plan will add $150,000.
All through General Motors history, groups of vigorous
men have been making similar decisions of great import
which affect the Corporation, its products, and the world.
Change the names to those of other cars and persons, place
them in other scenes, and you have a fair idea of the group
planning which has been going on in General Motors for
twenty-five years. All over the broad geographic range of
the Corporation, both in the United States and abroad,
plants have been growing, as the Pontiac plant grew, be-
cause men who knew what they wanted could agree on
programs and carry them through.
Chapter VII
CADILLAC: THE TRIUMPH OF PRECISION
.HE two most vital trends in American machine indus-
try— Middle West daring and New England craftsman-
ship— met in the founding of Cadillac, an enterprise whose
success has had a profound effect on the whole automobile
trade and through it upon American industrial history. The
first of these influences has been discussed in the chapters on
Oldsmobile and Buick; the second entered the scene with
Cadillac, whose roots reach back into the New England
scene of traditionally competent workmanship and native
mechanical ingenuity.
New England's early eminence in American industry pro-
duced an imposing array of inventors and an army of able
mechanics. Indeed, until almost the turn of the present cen-
tury, New England dominated the American machine in-
dustry, and for a time it seemed likely to capture first place
in the rising automobile trade. The state of Massachusetts
recognized the importance of Blanchard's steam carriage,
built in 1825, by legislative enactment giving that vehicle
the right to use the roads. The first gasoline "horseless
buggy" of the modern era was also built in Springfield by
the Duryeas. The Pope interests in Hartford came early to
the support of the automobile, and both as manufacturers
of vehicles and part owners of the Selden patent, wielded
great influence through the infant years of the industry.
With this early start, the wonder is that the automobile
business slipped away from New England to the Middle
100
Cadillac
101
West. There were several reasons for this shift, and one
is this: New England inventors and mechanics went West
themselves. New England was always a seed-bed of talent
in the industrial arts; as the young men of New England
marched West they took its best traditions with them.
HENRY M. LELAND
The career of Henry Martyn Leland, founder of the
Cadillac Motor Car Company, is an outstanding example of
the influence of New England machine shop practice upon
the Middle West. Mr. Leland was born at Danville, Ver-
mont, February 16, 1843. He was early apprenticed in the
Crompton-Knowles Works at Worcester, Massachusetts.
As a skilled mechanic he was taken into the Federal
Arsenal, at Springfield, Massachusetts, and later worked in
the Colt revolver factory. The New England arms factories
were the first to apply fully the practice of assembling inter-
changeable parts, the great Eli Whitney establishing this
principle. By the time of the Civil War the machining and
assembly of arms parts had been highly refined, with the
result that Leland early became accustomed to a high de-
gree of precision, laying the foundation for an ideal of
102 The Turning Wheel
accurate machine work which later distinguished the out-
put of his Detroit factories.
After a stay of twenty years with the famous Brown &
Sharpe Manufacturing Company at Providence, Rhode
Island, Mr. Leland went "on the road" in the Middle West
where the company desired to introduce their machine tools
to the growing mechanical industries of that section. It was
in this way that he became acquainted with Detroit, its
industrial leaders and possibilities.
Moving to Detroit in 1890, he established the Leland,
Faulconer & Norton Company which made machine tools,
grinders, gear cutters, etc., and also did custom work
along those lines. In 1895 the firm became the Leland &
Faulconer Manufacturing Company, with Charles A.
Strelinger as secretary. Mr. Strelinger was a leading hard-
ware merchant whose immense trade in bicycles led him to
take a keen interest in every type of rapid transport. The
year 1896 is notable in Leland annals for the establishment
of a grey iron foundry which scored a remarkable success
by introducing more closely machined castings than could be
had at that time elsewhere, so that its products commanded
premium prices, sometimes as much as thrice the usual price.
In its plant on Trombly Avenue the company added
gears for chainless bicycles to its other lines, working out a
process for grinding these case-hardened gears to closer
standards. Another activity embraced the manufacture of
gasoline motors of five, ten, and fifteen horsepower for
marine uses, a line of production which inevitably brought
the company into the newly developing automobile business.
His experience with marine motors began in the East, and
all through his early days in Detroit Mr. Leland was an en-
thusiastic prophet of the almost unlimited future of internal
combustion engines.
Although it had made machinery and parts for other
automobile companies earlier, Leland & Faulconer did not
enter quantity production of automotive material until
it began manufacturing transmission gears for the one-
cylinder motor car designed by R. E. Olds — the famous
curved-dash runabout. After the Oldsmobile factory had
been destroyed by fire, need to restore production quickly
Cadillac 103
led Mr. Olds to turn over to Leland & Faulconer part of
his motor manufacture. This was seized upon as an oppor-
tunity to show the world to what close standards a gasoline
engine could be built. An associate of Henry M. Leland
says in this connection:
At the first automobile show in Detroit, the Olds display contained
two cars, one powered by Olds, the other by Leland. I recall that
Henry Ford pointed out to us as a curiosity the fact that the
Leland motor was operating under brakes in order to bring it to
the same pace as the Olds motor. Our motor developed 3.7 horse-
power as against 3 for the Olds-built motor. This superiority was
due entirely to closer machining. H. M. Leland went seriously to
work on the Olds motor and by introducing larger valves and
improved timing system we were able to build this one cylinder
up from 3.7 horsepower to 10.25. On taking the improved article
to the Olds Company, we were dismayed by the refusal to use it.
Mr. Olds was getting all the business he could handle and I sup-
pose such a radical change in power plant would have necessitated
alterations in many directions. The point is significant however as
a key to a future of accuracy methods in manufacturing.
While Olds was rushing rapidly into quantity production
and Leland & Faulconer were gaining their reputation for
precision, a third group of Detroit men, with ample capital
at their disposal, formed the Detroit Automobile Company
in 1899, in an endeavor to pioneer a merchantable pas-
senger car. These men were William H. Murphy, Lem
W. Bowen, Clarence A. Black, and A. F. White, all citi-
zens of the first rank, who had as their chief guide and
mainstay in the mechanical department no less a person
than Henry Ford. Mr. Ford's ideas then ran more to speed
than to comfort, and after he had produced two racing cars
which made quite exceptional records but were not at all
what his backers visualized as meeting the market demand,
the Detroit Automobile Company group came to Leland &
Faulconer and agreed to use the latter's improved motor
which the Oldsmobile organization had not seen fit to
adopt. With their assistance the Cadillac Automobile Com-
pany was organized on August 22, 1902, with a capital of
$300,000. Thus Cadillac became established at Cass &
104
The Turning Wheel
Amsterdam avenues, Detroit, a site it continued to occupy
for many years.
The selection of that name was a logical one for men
versed in Detroit history. Antoine Sieur de la Mothe de
Cadillac was the leader of the French expedition which
made its first settlement at Detroit in 1702, just two
Cadillac "one-lunger" 1902
From Duncan s World on Wheels
hundred years before the founding of the new automobile
company. In his high courage, enterprise, and ability the
founders saw the very qualities which they hoped to bring
to their fledgling corporation. His coat-of-arms became the
emblem of the new company.
Work on the first Cadillac automobile had been begun in
September, 1902 — a one-cylinder car known as Model A,
of which two units were completed in March, 1903. In the
following twelve months Cadillac built and shipped 1,895
finished automobiles. From the completion of that first car
the future of Cadillac has never been in doubt.
Cadillac 105
This famous "one-lunger" was then the last word in
superior workmanship. The engine was located under the
front seat; a hand crank at the side served as a starter. The
driver sat to the right; a real steering wheel offered an
advanced feature, nearly all the other cars of the day
steering by tiller control. The car had no running board, but
patent-leather fenders imparted an air of distinction. Four
passengers might ride, two in front and two in the rear.
Heavy brass kerosene lamps and a hand-operated bulb
horn cost extra.
A situation then arose which was not uncommon in those
days. While Leland motors were giving excellent satisfac-
tion, the Cadillac Automobile Company was unable to do
equally well as regards chassis and body manufacture. It
brought its troubles to the Leland organization. As the lat-
ter could not afford to see art outlet for their motors closed,
they accepted, with a good deal of misgiving, the proposition
to undertake the general management of Cadillac. The
consolidation of Cadillac Automobile Company and
Leland & Faulconer Manufacturing Company into the Cad-
illac Motor Car Company was completed on December 27,
1904. Henry M. Leland became general manager.
In 1904 the company introduced the Model B one-
cylinder Cadillac. In all, 16,126 one-cylinder Cadillacs were
manufactured on the two models. The one-cylinder cars
formed the bulk of early output demand continuing after
the "30" of four cylinders was introduced in 1905. A spec-
tacular proof of the long life of these one-cylinder cars was
given in 1922 when on the twentieth anniversary of the
company, Lucien R. Burns, who had been with Cadillac
since its organization, drove one of the first cars it had ever
built from Detroit to New York where he had long before
unloaded the first Cadillac shipped into the city. More than
67,000 of the "305" were manufactured. Both the one-
cylinder and the "30" had the notable feature of inter-
changeability of parts.
The proudest achievement of early Cadillac history, the
winning of the Dewar trophy, awarded by the Royal Auto-
mobile Club of London, England, for the greatest advance
by any motorcar during the year, flowed directly from this
106
The Turning Wheel
achievement of parts interchangeability. Until the London
demonstration, the world believed that English, French,
and German workmanship stood superior to American and
that the rise of the automobile industry in this country re-
ceived its impetus from other factors than those involved
design and manufacture — such factors as the vast
in
Cadillac cars drawn up in London, 1907, for tests which won the
1908 award of the Dewar Trophy
distances of America, its large population and the broad dis-
tribution of wealth. Cadillac, practising the highest stand-
ards of close workmanship, now revealed that automobiles
could be made of interchangeable parts just as effectively as
firearms could be.
A graphic picture of that triumph and explanation of
what it meant to the reputation of American cars abroad is
contained in a letter in the Automobile Trade Journal of
December, 1924, from F. S. Bennett of F. S. Bennett, Ltd.,
24 Orchard Street, London, W. I., the pioneer agent of
Cadillac in the British Isles. A half-page Cadillac adver-
tisement in that trade organ in 1903 led Mr. Bennett into
correspondence with the company, which resulted in the
setting up of an agency. He writes :
I would not like to say just how many million dollars have changed
hands as the direct result of this advertisement, and it goes much
Cadillac 107
&.~ .4
further than this, as it can be rightly claimed to have been the
birth of the industry of American cars in Europe.
The early history of American cars over here might be said to be
the early history of the Cadillac car. In the very early days a few
American cars came over here but did not make good. The Cadil-
lac was the first to establish itself and in doing so established the
American-made automobile in this market. For several years I
plowed a lonely furrow, being the only man who did not falter
in his belief in the American car.
It was not until what is now known as "the famous Cadillac
standardization test" that the prejudice, still surviving, of dumped
American bicycles and a certain number of poorly made cars, was
successfully overcome.
This test in 1906 consisted of three Cadillac cars being assembled
in an open shed at Brooklands track from a medley of parts rep-
resenting the dismembered components of three Cadillacs taken
from the dockside by the Royal Automobile Club officials as they
arrived from America and taken to pieces by them and jumbled
in the shed mentioned.
Then the Cadillac mechanics assembled the cars from the heap
with no other tools than wrench, hammer, screw driver and ply-
ers. The three cars were immediately put into the hands of the
Royal Automobile Club official observers and went through a
5OO-mile test on the Brooklands track, finishing with a perfect
score.
That was the first demonstration here in the art of motor car
standardization and it created a profound impression. For this,
the Sir Thomas Dewar trophy — awarded for the most meritorious
performance of the year — was awarded by the Royal Automobile
Club to Cadillac. The Cadillac is the only automobile company
that has won this trophy twice.
The effect of this test on the public mind makes it stand out as
historic and unique, and even this morning, as I write this, I re-
ceived a press clipping with reference to this test carried out
eighteen years ago. I can truthfully say that during the eighteen
years, no week has passed in which a clipping from some news-
paper in some part of the world has not arrived referring to this
test.
It had the effect of giving the Cadillac car in particular, and the
American-made car in general, a place in the sun in this country.
On this side of the water it answered completely the adverse
criticisms against the American-made car and opened wide the
gate for many American manufacturers to come into this market.
108
The Turning Wheel
The result proved a triumph for Cadillac methods, also
a revelation of the truth that quantity production and
quality production by no means need be antagonistic. The
lesson was plain enough : high standards of accuracy could
be secured in a large factory geared to high production as
well as in a small shop where each part received individual
attention.
Cadillac won the Dewar trophy a second time in 1913 as
a result of its pioneering in electrical starting, lighting,
and ignition, being the first car so equipped. Mr. Leland's
keenness to relieve the need for cranking spurred C. F.
Kettering of Dayton Engineering Laboratories to his no-
table experiments and eventful triumph in this revolution-
ary creation.
The Dewar Trophy , twice awarded to Cadillac, 1908 and 1913
By 1908, when General Motors was formed, Cadillac
had secured a position of unquestioned eminence in the
automobile world. Its one-cylinder car had been a tremen-
dous success, and the four-cylinder "30" had reached an
annual production of between 7,000 and 8,000 with the
Cadillac 109
price at $1,400. The company was well managed, highly
prosperous, and financially conservative. Although capital-
ized for $1,500,000, this represented largely the plowing
back of profits. It has been said that only $327,000 in cash
went into the enterprise from all sources. Already Cadillac
had achieved an outstanding reputation in the fine car field,
and it was this reputation which led Mr. W. C. Durant to
attempt adding Cadillac to his newly formed General
Motors Company.
Mr. W. C. Leland, who had charge of the negotiations
for Cadillac, said that no written option was ever given
in the course of the transaction which covered the better
part of a year:
Our first price was $3,500,000 good for ten days. Mr. Durant did
not return for six months and then said he would accept that fig-
ure. However, the situation had changed in our favor in the mean-
time because Cadillac had been making exceptionally good earn-
ings, the country had rallied from the slump of 1907 and we
could see only fair weather ahead. Consequently we asked them
$4,125,000, this to hold for another ten days. Mr. Durant was of
course tremendously busy during all this time and I suppose he
had difficulty in finding the money for what was then a colossal
deal as we had asked cash. At any rate the second ten-day period
expired before Mr. Durant again returned, whereupon he was
given a quotation of $4,500,000 which he accepted. The transfer
was made on that basis on July 29, 1909, in cash, the transaction
being the largest negotiated in Detroit up to that time.
It should be added in explanation that Cadillac was
really purchased by the Buick for General Motors to which
transfer followed shortly after. The net worth of Cadillac
at the time of acquisition was $2,868,709, the difference
between that figure and the purchase price representing
the good-will value which Cadillac had built up in its seven
years of life. The sales price represented slightly more
than $300 a share because, in addition to the cash involved,
$275,000 was paid in Preferred stocks. It is interesting to
record that Benjamin Briscoe at one time had an option
on 60 percent of the company's stock at $150 per share.
But the option expired, owing to his inability to find cash,
shortly before Mr. Durant entered the scene with his offer
110
The Turning Wheel
of $160 a share. If the latter had acted promptly on his
first option he would have saved a million dollars.1
However, the price as finally fixed was not at all un-
reasonable, viewed in the light of Cadillac's earnings at
the time of these negotiations, for a net of $1,969,382 was
reported for the year ending August 31, 1909. The com-
pany's earnings continued at or above this rate for the
next ten months during which Cadillac turned into the
General Motors treasury $2,000,000. Both Henry M. and
W. C. Leland remained with Cadillac until 1917.
From its beginning Cadillac has followed this slogan,
"Craftsmanship a Creed, Accuracy a Law." Various later
developments of Cadillac in its evolution toward its present
position will be described elsewhere, but as the story of
General Motors unfolds, the reader will do well to recall
that Cadillac standards have influenced all General Motors
cars and products, and indeed the whole automobile industry.
aThe full purchase price was $5,669,250. See p. 223.
Chapter VIII
THE BIRTH OF GENERAL MOTORS
A
LMOST from the moment when he reorganized Buick
and increased its output, Mr. Durant seems to have begun
looking toward wide horizons. Hardly had he moved Buick
assembly to Jackson than he organized the Janney Motor
Company there. Realizing that axles were almost as im-
portant as motors, he induced the Weston-Mott Company
to move from Utica, New York, to Flint, allotting it a
strategic site in his new industrial area next to Buick. With
Weston-Mott came Mr. C. S. Mott, a future director and
vice-president of the Corporation. Mr. Durant also drew
to Flint the Frenchman, Albert Champion, and encouraged
him to locate there the production of the famous AC spark
plug. Forced at the outset to lean on local independent
makers of springs and bodies, Mr. Durant looked forward
to the time when those activities would be part of a larger
picture. General Motors was beginning to take shape in his
mind.
Mr. Durant was not the only man thinking along those
lines. Others perceived the difficulties and dangers of in-
dependent operations, and visioned from afar the profits
to be garnered by a great automobile merger. On the staff
of A.L.A.M. (Association of Licensed Automobile Manu-
facturers) was Hermann F. Cuntz, a mechanical engineer
who acted as contact man between the Selden patent
licensees and the central office in New York. He was per-
sonally acquainted with all the manufacturers operating
under the Selden patent. He knew what they had in their
in
112 The Turning Wheel
treasuries as well as in their plants, whether their organiza-
tions were strong or weak, and what their prospects were
for future business. Possessed by the idea that a merger
of certain products was both feasible and advisable, he in-
terviewed Anthony N. Brady, one of the powers of Amer-
ican finance, who had built a vast fortune through
consolidating traction lines and public utilities.
C. S. MOTT
Founder, Weston-Mott Company
Mr. Brady being favorable to the idea, Mr. Cuntz
negotiated with a number of manufacturers who proved
willing to sell control at favorable prices. But Mr. Brady
held off, prophesying the panic of 1907 and saying that
after the automobile trade had experienced a taste of the
hard times in store for them the desired companies could
be brought into the combine for less money. The financier
was right about the panic, which arrived according to his
schedule and found him prepared for it, but he was wrong
in estimating its effect upon the automobile trade.
American motordom weathered the storm of 1907 better
than any other line of business. Buick, and the other com-
panies with which Mr. Durant had affiliated himself, came
through without a scratch. In that bad year Buick produc-
tion actually rose by 50 percent, and Flint was one of the
few cities in the country unaffected by panic. Its banks went
The Birth of General Motors 113
on paying out currency as if nothing had happened, al-
though currency payments were suspended in many quarters.
The effect of this immunity on Mr. Durant was twofold.
It immensely enhanced both his confidence and his prestige,
and it placed various other manufacturers, whose businesses
had proved less resistant to strain, in a frame of mind where
they would be willing to listen to him when he should be
ready to talk merger to them. But whoever talked merger
to them effectively would have to do so in large figures. The
break in values which Mr. Brady had forecast for the auto-
mobile world simply had not come to pass. Instead, Anthony
N. Brady's opportunity to crown his business career with a
stupendous industrial merger had passed while he hesitated.
He still kept one eye on automobiles, however, becoming
active in United States Motor Company and in 1910
a director of General Motors, but his chance to play the
leading role in the industry had departed.
It is interesting to speculate a little on what might have
happened if Mr. Brady, with his large resources and shrewd
sense, had taken the lead in the industry in 1906, when
he was considering the plan presented to him. Probably
his entry would have been effective in bringing the auto-
mobile business into the great financial marts under proper
sponsorship far earlier than it appeared there. Automobile
securities might have appeared on the New York Stock
Exchange in 1908 instead of in 1911, when the voting trust
certificates of the General Motors Company were the first
automobile securities listed by the Stock Exchange. The
whole automobile industry might have been given a definite
and enduring trend toward the East, with the early New
England companies growing instead of dwindling as they
actually did, and the Middle Western companies not mak-
ing the headway which, historically, they have made. If Mr.
Brady had organized General Motors instead of Mr.
Durant, the Corporation might have lost much of the
dramatic interest now attached to it.
With Buick standing like a rock through 1907 and swing-
ing into 1908 at a pace which promised a strong financial
position at the end of the year, Mr. Durant was ready
to proceed with his merger. He planned the erection of a
114 The Turning Wheel
corporation which would be merely a holding company, of
which there were many examples among the "trusts" of the
period. We shall see how General Motors changed from a
holding company to an operating company under the press-
ure of economic forces too strong to be withstood, as the
automobile made its way into large production and broad
relations with the consuming public. In general, American
economic history shows that while holding companies meet
with little difficulty in the public utility field, where mon-
opoly and state regulation are involved, they do less well in
the manufacturing field, where large labor forces must be
maintained and style goods sold in open competition.
Spurned in Chicago by a shortsighted luminary of the
Bar, Mr. Durant took himself to a young lawyer of New
York, Curtis R. Hatheway, of Ward, Hayden & Satterlee,
who drew up articles of incorporation for the General
Motors Company of New Jersey. The company was em-
powered to use its capital of $12,500,000 (authorized
September 28, 1908) in the purchase of the securities of
automobile and accessory companies.
The certificate of incorporation of the General Motors
Company was signed by the incorporators, George E.
Daniels, Benjamin Marcuse, and Arthur W. Britton on
September 15, 1908, and filed in the office of the clerk of
Hudson County, New Jersey, the same day. The following
day, it was filed in the office of the Secretary of State of
New Jersey at Trenton. As the New Jersey statute declares
that the filing in the latter office determined the date of the
body corporate, the latter date, September i6th, has been
accepted as marking the birth of General Motors.
The incorporators met on September 22d, adopting by-
laws under which they became the first directors and
officers, as follows:
George E. Daniels, president
Benjamin Marcuse, secretary and treasurer
Directors:
Arthur W. Britton
George E. Daniels
Benjamin Marcuse
The Birth of General Motors 115
On October 20, 1908, the by-laws were changed to pro-
vide for a board of seven directors and the original officers
were succeeded by the following who held office for con-
siderable periods:
W. M. Eaton, president from October 20, 1908, to
November 23, 1910
W. C. Durant, vice-president from October 20, 1908, to
November 16, 1915
C. R. Hatheway, secretary and treasurer from October
20, 1908, to January 26, 1911
It will be noted that Mr. Durant appears as vice-presi-
dent, though he was actually the founder and active head
of the organization. By placing Mr. Eaton, an influential
business man of Jackson, in the highest office, Mr. Durant
left himself free for more active duties. The three incor-
porators were all out of the directorate by the end of the
year, Mr. Britton being succeeded by Henry Henderson,
and Messrs. Daniels and Marcuse by Messrs. C. R. Hathe-
way and Frederic L. Smith on December i6th, after which
meeting the board consisted of:
W. C. Durant elected October 20, 1908
W. M. Eaton
C. R. Hatheway
Henry Henderson
W. J. Mead
Frederic L. Smith " December 16, 1908
Henry Russel
Theodore F. MacManus in Men, Money, and Motors
gives a vivid recital of the origin and naming of General
Motors, which exemplifies the offhand way in which the
dashing founder arrived at his decisions:
The automobile business was a hazardous business. Durant appreci-
ated this. His azure dreams of power were often disturbed by
nightmare flashes. Fly-by-night concerns with no objective save a
116 The Turning Wheel
skimming of the market and immediate profits for their promoters
were everywhere. Durant realized there had to be stabilization.
Early in 1908 he proposed to Ford, Couzens, Briscoe, and Olds a
consolidation of Ford, Maxwell-Briscoe, Reo, and Buick.
Ford and Couzens played with the idea, matched their wits
against the wits of the others and when Durant appeared most
hopefully they tossed in this stipulation :
"We will go in only on condition that we receive three million
dollars, in cash."
Not to be outdone by the Ford and Couzens ultimatum, R. E.
Olds got to his feet and pronounced sentence on the consolidation :
"If you do that for Ford you've got to do likewise by Reo. We
will expect three millions, in cash, also."
Durant waved his hands. The meeting ended. The project was
abandoned.
Durant, however, was not easily discouraged. Calling aside Ben-
jamin Briscoe, he said:
"Let's go it alone. We two."
Briscoe was willing and the two men went to see George W.
Perkins, of J. P. Morgan & Co. The bankers agreed to underwrite
$500,000 of the new $1,500,000 capital required. A charter was
tentatively drawn up and the consolidation was to be called the
International Motors Company.
These negotiations fell through, but since a representa-
tive of the banker had suggested the name "International
Motors" Mr. Durant crossed out the word "International"
and wrote in "General."
Mr. MacManus writes :
"How does that look?" he asked, holding it so Briscoe could see.
"Fine. You mean you'll call your organization the 'General
Motors Company'?"
"Yes."
Briscoe left.1 Durant sat there, studying the sheet of paper on
which he had written — almost carelessly had written — a name that
has come to be familiar around the world.
aBriscoe's United States Motor Company was dissolved through receiver-
ship in 1912. Its backbone was the Maxwell-Briscoe, which Benjamin Bris-
coe organized in 1904 with $42,000 in cash. MacManus says that Mr. Durant
offered the equivalent of $5,000,000 in General Motors stock for Maxwell-
Briscoe, saying that this bloc would have been worth $200,000,000 later and
in the meantime would have paid $35,000,000 in dividends.
The Birth of General Motors 117
Mr. Durant considers that here and there in Men,
Money, and Motors he is not reported with entire accuracy
by Mr. MacManus, who is somewhat given to dramatic
rhetoric while Mr. Durant was ever precisely polite in his
choice of words in conversation. As to the name, General
Motors, Mr. F. L. Smith says in his published reminiscences
that he contributed it some time before in a Lansing con-
ference looking toward the merger of Buick and Oldsmobile.
Amid what seems almost a conspiracy of silence General
Motors was born. The New York Times of September
1 6th, conned by Mr. MacManus, revealed that:
President Theodore Roosevelt was in a jovial mood. "Bully!" he
cried when reporters told him that Charles Evans Hughes had
been nominated for Governor of New York state on the Repub-
lican ticket . . . Mike Donovan, an athletic trainer, was on his
way to the Roosevelt home at Oyster Bay and when approached by
newspaper men he vowed : "I am going to write a book on Teddy
— he deserves it!"
Justice Davis decided against the city in its case against an auto-
ist who had been arrested in Central Park the preceding December
16: "The charge against this man is driving with skid chains and
the law does not prohibit their use," declared the Court.
The White Star Company announces the construction of two new
ocean liners, the keel to one ship is now being laid and it will be
called the Olympic; the keel to the second ship will be laid later
and it will be called the Titanic.
New Jersey had a flyer who was critical of the Wright aeroplane
as compared with his own; Wilbur Wright remained in the air
over LeMans, France, for thirty-nine minutes and broke distance
records by flying twenty-six miles.
Jack Johnson and Tommy Burns were matched for the heavy-
weight championship of the world and agreed to fight in Sydney,
Australia.
But there was no mention of the incorporation of Gen-
eral Motors, and no wonder, since the original incorpora-
tion was for only $2,000, a nominal sum soon increased.
Except in Flint, the fledgling corporation seems to
have attracted little attention at the start. Horseless Age,
then the leading journal of the automotive trade, gave no
118 The Turning Wheel
extensive notice until December 3Oth, when it was stirred
by the Olds negotiations to publish the following :
THE GENERAL MOTORS COMPANY LAUNCHED
The formation of the General Motors Company as a New Jersey
corporation, and offers of an exchange of stock made to stock-
holders of the Olds Motor Works, of Lansing, Michigan, have
started anew rumors of the consolidation of automobile manufac-
turing interests. Considerable secrecy is maintained in regard to
the new company, which is said to be capitalized at $12,500,000,
divided into $7,000,000 Preferred stock and $5,500,000 Common
stock, each share having a par value of $i. At present the new
company is said to embrace the Buick Motor Company, of Flint,
Michigan, and the Olds Motor Works, of Lansing, Michigan.
Reports from Lansing, Michigan, state that the stockholders of
the Olds Motor Works have been approached with a proposition
to exchange their shares for shares of the General Motors Com-
pany, the basis for the exchange being $400 in Preferred stock and
$IOO in Common stock of the General Motors Company for each
$i,OOO of the Olds Motor Works stock. There is said to be con-
siderable opposition on the part of some Olds stockholders, al-
though it is said that holders of three-fourths of the stock have
assented. Attorney C. R. Hatheway, of the law firm of Ward,
Hayden and Satterlee, is said to be engineering the deal, but re-
fused to make any statement at present. The General Motors Com-
pany has an office in the Terminal Building, Forty-first Street
and Park Avenue, New York City, but the manager was said to
be "extremely busy" and could not be seen. The plan is said to
be to continue the different works as at present under their proper
names, assigning to each the manufacture of certain types of
vehicles. The General Motors Company will act as a holding con-
cern, and appoint the directors of the subsidiary companies.
On September 29th General Motors- bought from W. C.
Durant 18,870 shares of Buick Common and 1,130 shares
of Preferred at $150 a share, payable two thirds in General
Motors Preferred and one third in Common. The new hold-
ing company purchased the W. F. Stewart Company body
plant, directly across from Buick for $240,000 in stock,
and leased it to Buick. Then began the Olds negotiations,
The Birth of General Motors 119
detailed elsewhere, which were the first notices given the
automobile world outside of Flint that a colossal merger
had been begun.
When Oakland entered General Motors within the
month, the automobile world did not need to be reminded
again that here was something worth watching. Buick,
Oldsmobile, and Oakland — three of the largest plants and
three of the "best names" in the industry — had been
brought together in less than three months. Further ac-
quisitions soon followed. A few notes amplifying the min-
utes of the young corporation indicate how simply the three
original companies were "digested" and more companies
added:
February 23, 1909, General Motors declared its first semi-annual
dividend of $3.50 on its Preferred stock — a dividend never missed
from that day to this. This dividend was payable April I on stock
of record, March 20.
On June 5, the directors heard the good news that all Buick
Common stock had been converted into General Motors stock on
the agreed basis of $150 a share, payable two thirds in Preferred
and one third in Common, and also all but fifteen shares of the
5,000 outstanding Buick Preferred, a remarkable example of
stockholder confidence in a new enterprise. On September 10 the
directors voted to increase the capital stock to $60,000,000—
200,000 shares of Preferred and 400,000 shares of Common.
The Olds union was completed by the purchase of the Seager
Engine Works in September and the last of Oakland's stock
passed to General Motors about the same time, though the price
of the last purchase rose considerably, as the directors authorized
the final purchase at $30 whereas the first blocks had been secured
at $10 and $11 a share.
In what must be reckoned a terrific outburst of corporate
energy, the following units were added to the General
Motors family, either through purchase of all stock or a
substantial interest, in less than two years :
Champion Ignition Co., Flint (later AC Spark Plug Co.)
Weston-Mott Company, Flint
Reliance Motor Truck Co., Owosso
Rainier Motor Co., Saginaw
Michigan Motor Castings Co., Flint
120 The Turning Wheel
Welch Motor Car Co., Pontiac
Welch-Detroit Co., Detroit
Cadillac Motor Car Co., Detroit
Jackson-Church-Wilcox Co., Jackson
Michigan Auto Parts Co., Detroit
Rapid Motor Vehicle Co., Pontiac
Cartercar Co., Pontiac
Ewing Automobile Co., Geneva, Ohio
Elmore Manufacturing Co., Clyde, Ohio
Dow Rim Co., New York City
Northway Motor & Manufacturing Co., Detroit
National Motor Cab Co.
Also stock interests were taken in Maxwell-Briscoe, the
United Motors Company and Lansden Electric.
By the end of 1909 General Motors had acquired or sub-
stantially controlled more than twenty automobile and
accessory companies. Two other prospective purchases nar-
rowly missed fire — Thomas and Ford. October 26th, A. H.
Goss offered to sell to General Motors the entire capital
stock of the E. R. Thomas Company of Buffalo, and on
the same day the directors authorized the purchase of the
entire capital stock of the Ford Motor Company of De-
troit for $8,000,000 — $2,000,000 down and the balance
in one and two years, "if arrangements can be made to
finance."
Fateful "if!" Apparently arrangements could not be
made to finance. Mr. Ford held out for cash, the young
holding company did not have the cash and bankers could
not be found who would risk $8,000,000 on an industrial
property which has since become one of the most valuable
in the world.
Henry Ford and James Couzens were at the Belmont Hotel, in New
York City [writes T. F. MacManus in Men, Money, and
Motors]. They were together in their room and Ford, suffering
from lumbago, was lying on the floor because there was no com-
fort for him in bed. The telephone bell jangled and Couzens, pick-
ing up the receiver, heard a voice :
"This is Billy Durant. I'd like to see you."
"What about?"
The Birth of General Motors 121
"I can tell you when I see you."
Returning upstairs within a half hour Couzens . . . said:
"Billy Durant wants to buy the Ford Motor Company."
"How much will he pay?"
"Eight million dollars."
"All right. But — gold on the table!" snapped Ford.
"How do you mean that?"
"I mean cash."
Durant came back the following morning, and Couzens delivered
Ford's message. The two men shook hands on the proposition and
Durant left to raise the necessary money. With him he had a
resume of the Ford business and its prospects. The capital stock of
the Ford company was $2,000,000 and it had a surplus of
$1,180,000, exclusive of goodwill and patents. Its earnings in
1908 were $2,684,000 on a business of $9,000,000 and it was
planning to do a business of $15,000,000 in 1909 including an out-
put of 21,000 automobiles. Durant had reached an agreement with
Couzens to pay $2,000,000 in cash and the balance in one and
two years.
On October 26, 1909, Durant received the sanction of his board
of directors for the acquisition of the Ford business, went back to
his bankers and was informed :
"We have changed our minds. The Ford business is not worth
that much money."
Yet, as between the purchase of Ford and the purchase
of the E. R. Thomas Company, both of which failed to
materialize, probably the latter would have attracted the
more public attention in 1909. Mr. Ford had not then be-
come the public figure he is today, and the Thomas Flyer
was a phrase on the lips of everyone, as the nation had fol-
lowed its victorious race from New York to Paris, three
quarters of the way around the world, via Siberia, a contest
waged on three continents and over wretched roads, the
sternest test met by an American car up to that time.
General Motors swallowed so many companies in its first
two years that acute indigestion followed as a matter of
course. Since the whole industry was young in engineering
experience, Mr. Durant bought certain companies of un-
proved productive power simply because they were believed
to have basic patents or features which might be important
later. Cartercar, for instance, was purchased while the
122 The Turning Wheel
selective transmission and the friction drive were still in
rivalry. The possibility that the latter might develop made
the Carter patents seem worth while. Elmore, too, was
thought to have basic patents on a two-cycle engine which
might prove valuable. Other "buys11 were made to assure
regular supplies of material and parts.
Some of the purchases were soon seen to be untenable.
Welch of Pontiac, for instance, entered the General Motors
family on June 5, 1909, and was on its way out within five
months, decision to sell being taken on October 26th.
Welch-Detroit remained longer, though it never could be
brought to a profitable position. The Welch brothers, both
noted engineers, had developed a large, heavy car of ad-
vanced design, which was expected to take place as the
price-leader of General Motors. But Fred Welch, the driv-
ing force in the enterprise, was drowned in Lake St. Clair,
and without him the operation languished to the point
where it had to be cut adrift.
Others could not be brought quickly to the point of
carrying themselves and required capital outlays burden-
some to the holding company. Ewing, Elmore, Cartercar,
Rainier, and Dow Rim Company are examples of projects
that cost General Motors more than they returned. No
doubt, several of these properties were "unloaded" on
General Motors in the rush of 1909, but the sellers prob-
ably did not wait for the enormous profits which would
have been theirs if they had held for a long period the
securities they then received. For instance, Dow Rim Com-
pany was purchased on November 27, 1909, for $28,000
in General Motors Preferred and $20,000 in notes, Mr.
Alexander Dow electing to take notes instead of an amount
of Common stock which later had a value, according to
his own estimate, of several million dollars. Dow Rim was
written down to $i on the company's books in 1911.
Mr. Goss, whose effort to sell the E. R. Thomas Com-
pany to General Motors came to naught, sold the Elmore
Manufacturing Company of Clyde, Ohio, to the Company
for $600,000 in General Motors Preferred at par. Mr.
Goss was later active in Buick and General Motors affairs.
The Birth of General Motors 123
Another addition destined soon to fall by the wayside
was the Ewing Automobile Company of Geneva, Ohio,
purchase of which was authorized on October 26, 1909,
and written down to $i on June 14, 1911.
Less disastrous but nevertheless troublesome was the
Rainier purchase. The big Rainier car not having found a
market, the directors on March 29, 1909, incorporated the
Marquette Motor Company in Michigan for $300,000 to
take over all the Rainier assets, the idea being to use the
Saginaw plant for the production of a light Marquette car.
Some of the difficulties encountered there will be related
in another chapter.
Net sales of General Motors, by all its units, for the first
year of operations, ending October i, 1909, were $29,029,-
875, and net income available for dividends, $9,114,498, a
truly impressive record which was the result of the com-
bined labors of 14,250 persons. No wonder General Motors
was hailed at the end of its first year as the lustiest indus-
trial infant ever born in America, and a stock dividend of
150 percent on the Common stock, declared November
1 5th, seemed to be entirely justified.
The directors at their memorable meeting of October 26,
1909, found that the Company had four reliable producers.
Buick and the newly purchased Cadillac could certainly be
classified as dependable; Oakland was also doing well and
Olds had excellent prospects. The situation seemed rosy in
the extreme, but within a few months changed rapidly for
the worse.
In spite of substantial earnings and encouraging stock
sales, a cool survey would have revealed the dangers of the
situation. Because of the rapidity with which the various
units had been gathered into the fold, there could be no
certainty of uniform bookkeeping as yet and probably no
exact knowledge of inventory commitments. Consequently,
the liabilities were very likely larger than appeared and
the surplus smaller. Furthermore, of course, plant and ma-
terial assets could not be made liquid easily. Nevertheless,
there was the comforting thought that the company now
had stock to sell, the authorized capitalization having been
increased on September 10, 1919, to $60,000,000; 200,000
124 The Turning Wheel
shares of Preferred stock and 400,000 shares of Common,
all $100 par. The directors' faith in Mr. Durant's ability
to sell stock was enough to keep the company on its way
buying and building.
In January, 1910, the directors authorized purchase, up
to $400,000, of shares of the Randolph Motor Car Com-
pany, a commercial vehicle manufacturer, and added $100,-
ooo to its capitalization.
At the same meeting a fateful decision was reached to
invest in Heany electric stocks by trading in 8,290 shares
of General Motors Preferred and 74,775 shares of Gen-
eral Motors Common. John Albert Heany claimed to be
the inventor of the modern tungsten filament electric light,
which, in fact, worked a revolution in illumination. Un-
fortunately for General Motors, his patent claims were not
upheld by the Patent Office. Even if all had been plain sail-
ing, buying into the Heany companies was buying into a
lawsuit. On May 5, the Company plunged deeper into the
Heany venture.
One of the historic moves of the Company in 1910 was
the incorporation in Canada for $1,200,000 (12,000
shares) of McLaughlin Motor Car Company, Ltd. At
Oshawa, cooperation between the McLaughlin carriage in-
terests and Buick had brought Buick profitably into the
great Canadian market. Of the 12,000 shares in the new
McLaughlin company, 5,000 were taken by Buick. Out of
this company General Motors of Canada, Ltd., would in
time emerge.
The faster a man or an institution travels the more seri-
ous is a stumble. To maintain the tempo of that surprising
period both a high ratio of earnings to sales and capital
inflow were necessary. Michigan had supported the enter-
prise loyally with stock subscriptions, but Michigan was
not then a rich state in liquid resources ; the cream of capital
had already been skimmed. Mr. Durant had to go further
afield for money. While Buick, Oakland and Cadillac were
making substantial earnings and Olds was being revived,
various of the lesser companies were losing. General
Motors was increasing its volume but not its earnings, yet
expansion had been predicated on more profits. By May,
The Birth of General Motors 125
1910, Flint knew something had happened when new con-
struction suddenly stopped at Buick and lay-offs became
chronic. Nevertheless, the greatly daring chairman of the
executive committee reported on June 2ist to the directors
that he had certain negotiations with Willys-Overland
Company under way, looking to acquisition. The directors
must have gasped when they heard that, for General
Motors now needed to be saved from the penalties of too
rapid expansion rather than be expanded still farther.
Mr. Durant rallied to the feat of saving his great enter-
prise with his usual intrepidity. He dropped everything
else to search for money. Until this pinch, he had perhaps
not taken bankers quite as seriously as business leaders
must take the guardians of public funds. It would be
pleasant now to have behind him the inexhaustible resources
of J. P. Morgan & Company, a connection which had been
possible at an earlier stage.
The situation had changed with such rapidity that ade-
quate relief was hard to find. In talks to bankers, the
extraordinary earnings of Cadillac were cited as con-
tributing $2,000,000 to General Motors coffers within the
year after its purchase. Always the reply came back that
Cadillac could have the money if it stood alone, but as it
could not be unscrambled from General Motors and since
this was intended to be a loan to General Motors it was,
therefore, not forthcoming. Even Cadillac itself was in
danger. An emergency joint meeting of the boards of the
First National and Old National banks of Detroit loaned
Cadillac $500,000 a few hours in advance of a pay roll
which otherwise could not have been met. This whole epi-
sode reveals an astonishing degree of banking blindness
both as to the safety of a specific loan and as to the possi-
bilities of the industry. Modern practice accepts the earn-
ings of subsidiaries as the element properly to be considered
in establishing the credit of a holding company. Bankers
now understand, also, that loans to going industries are part
of their own social responsibility, since such loans preserve
employment and community values. The fact that Mr.
Durant had prophesied that 300,000 automobiles would
be produced annually in America had been a shock to many
126 The Turning Wheel
conservative bankers, who began to prophesy doom for the
Republic if that incredibility should come to pass. The
automobile "craze" was likened to the bicycle "craze" of
a few years before, the passing of which had brought finan-
cial disaster to many companies. It was in the face of such
hostility that the young General Motors Company went out
hunting for credit.
Buick pay rolls were also troublesome. Harry K. Noyes,
its Boston distributor, saved the day for Buick by expressing
to Flint suitcases full of specie and currency. Mr. Noyes also
collected company money, banked it in his own name and re-
mitted direct instead of through banks, so that the money
would be available for pay rolls: otherwise it might have
been applied on an overdraft.
In desperation Mr. Durant went West after the East
failed him. The West must help him, he thought, because
the West needed motor cars; it was in the West that he had
built up Buick trade so phenomenally. But Kansas City, St.
Louis and Chicago bankers declined to aid. Returning dis-
couraged from this journey, Durant and Goss picked up
A. B. C. Hardy in Chicago. The latter relates the following
as evidence of his hero's sunny courage under pressure:
The train stopped in Elkhart, Indiana, in a pouring rainstorm. Far
down the dark and dismal street shone one electric sign — BANK.
Durant shook Goss, who was dozing dejectedly in a corner.
"Wake up, Goss," said the leader. "There's one bank we missed."
The Chicago negotiations almost saved the day. A loan
of $7,500,000 was arranged with the Continental and Com-
mercial Savings and Trust Company. Then it was raised
to $9,500,000. Then it was rescinded. The longer the
situation waited the worse it grew, partly because decreas-
ing confidence brought demands, partly because investiga-
tions revealed growing liabilities, a condition easily ex-
plainable in view of the independent operations of the
various units and the lack of uniform accounting. One item
in the minutes makes it quite clear, for instance, that the
directors, on September iQth, did not know how much
money Oakland owed. By the time $7,500,000 had been
The Birth of General Motors 127
borrowed, $9,500,000 was needed, and by the time $9,-
500,000 was available, $12,000,000 was needed.
Retrenchments were hurriedly begun; the number of
employees declined by 4,250 to a total of 10,000. The
irony of the situation lay in the fact that net sales were
nearly double those of the preceding year, reaching a total
of $49,430,179. But the business had been done at a closer
margin, net income being only $10,225,367 or slightly more
than $1,000,000 above 1909. The rate of profit had de-
clined while commitments had increased; between the two,
General Motors was caught as in a vise.
JAMES J. STORROW
By September nearly all those interested had given up
hope, but Mr. Durant saw one avenue of escape. His
previous efforts to raise money had been based on a con-
tinuance of his management. In the East he found that he
could save the company if he stepped out. J. & W. Selig-
man & Company of New York and Lee, Higginson & Com-
pany of Boston, were interested on that basis, not otherwise.
The money centers of the East were conservative; Mr.
James J. Storrow of Lee, Higginson, who arranged the
rescue, represented a school of financial thought which
could not approve the dashing methods and hairbreadth
adventures which characterized General Motors in its
128 The Turning Wheel
infancy. With Mr. Albert Strauss of Seligman's he decided,
further, that the situation had gone so far that not only
a change of management but also a trusteeship was re-
quired. The terms were hard, but in no other way could a
receivership be avoided, so pressing was the need for funds.
Mr. Durant swallowed his pride and stepped down.
The arguments against receivership were of a sort to
appeal to both the bankers and Mr. Durant. Times were
good but not too good. A crash of such proportions might
have unsettled the country, and surely would have been
disastrous in areas where General Motors operated, espe-
cially in Pontiac and Flint which had been growing rapidly
on the basis of Buick and Oakland expansion, and where
even the shadow of a shut-down already had created distress
and political unrest. Mr. Durant was quite aware of these
local considerations which weighed heavily on the citizens of
Michigan who had backed his enterprise. The trusteeship
seemed to be the only way out.
On September yth, when the directors rescinded the
Chicago loan, they authorized the sale of the Michigan
Auto Parts Company and Welch-Detroit, probably on the
hint that a disposition to trim ballast would be acceptable:
ten days later they were willing to sell Marquette. Then,
on September 26th, after three weeks of anxious negotia-
tions, the board authorized the loan of $15,000,000 from
J. & W. Seligman & Company of New York and Lee, Hig-
ginson & Company of Boston.
The situation proved to be better than the prospect, and
only $15,000,000 of the $20,000,000 authorized 6 percent
notes went out. The company executed a blanket mortgage
of all its Michigan property through the General Motors
Company of Michigan, a corporation set up to hold title.
As part consideration for the loan, $4,169,200 in General
Motors Preferred stock and $2,000,000 worth of Common,
both at par, were delivered to the bankers. The company re-
ceived $12,750,000 in cash in return for its notes and stock
given under the loan contract, dated November n, 1910.
Preparing these documents and the exchanges necessary
under them required several weeks, but banker control can
The Birth of General Motors 129
be considered effective in the interim, although the new
board of directors did not take office until November I5th.
On that day the following directors retired from office:
A. M. Bentley of Owosso
E. R. Campbell of Flint and New York, son-in-law of
W. C. Durant
Wm. M. Eaton, also president
Harry G. Hamilton of Pontiac
C. R. Hatheway of New York, also secretary and
treasurer
Henry Henderson of Scotch Plains, New Jersey
Schuyler B. Knox of New York
W. C. Leland of Detroit
R. S. McLaughlin of Oshawa, Ontario
W. J. Mead of Lansing
John T. Smith of New York City
Thus ended, after less than two years of phenomenal
growth, the first phase of General Motors history. The
young giant, like so many young giants, had overreached
and come to grief. Many thought General Motors would
never rise again. Saddled with what seemed at that time
an unpayable debt, and all its property pledged as security,
there remained only the intangibles of good-will and a
strong demand for cars, to give the Common stock any
value whatever. To turn these factors to substantial ac-
count was the task of a new management inexperienced in
automobile manufacturing and merchandising, though ex-
pert in finance and well founded in business.
The glamor of bold dreams and brave deeds marked
the first phase : steady aim and calm judgment were to mark
the second. General Motors paid a stiff price for the life-
saving funds made available by the bankers. If the latter
had retained until 1929 the $2,000,000 worth of Common
stock they received in 1910, its value would then have been
more than ninety times the face value of the loan. The
1910 General Motors loan revealed on a large scale the
high cost of financing automobile enterprises.
130
The Turning Wheel
Viewed in retrospect, the 1910 loan seems to have been
unreasonably costly. Where $8,000,000 might have pulled
the Company through, the latter had to pay more than 7
percent on $12,750,000, the bonds having been taken at
85, with the utmost security given to the lenders under
mortgage and trust deed by a company with substantial
earnings and excellent prospects. In addition, General
Motors had to repay $2,250,000 which it never received,
and paid a large bonus in stock. The transaction is hardly
explainable except as placed against a background of ex-
treme banking distrust of the automobile industry in general
and also of driving personality behind the General Motors
expansion program.
GENERAL
MOTORS
Chapter IX
THE BANKERS TAKE THE WHEEL
HE new management, taking hold in the autumn of
1910, faced a complex task. It must sell or liquidate
subsidiaries which seemed either hopeless or unnecessary to
the corporate operation as a whole, set up efficient man-
agement in weak plants worth retaining, command the
loyal cooperation of the labor and management staffs, and
integrate control over an organization built up on the
basis of decentralization. When General Motors gave a
blanket mortgage and a trust deed, its position as a hold-
ing company was at once invalidated. Since it, and not its
subsidiaries, owed the $15,000,000, practical consideration
enforced the exercise of more authority from headquarters,
which were temporarily located on Woodward Avenue,
Detroit, across from the Pontchartrain Hotel, a site now
occupied by the National Bank of Detroit. About the middle
of 1911, the Company leased the upper floors of the new
six-story Boyer building at the southwest corner of Brush
and Congress streets, directly south from the Wayne
County Building.
The new board consisted of:
Anthony N. Brady of New York
Emory W. Clark of Detroit
W. C. Durant of Flint and New York
A. H. Green, Jr. of Detroit
J. H. McClement of New York
M. J. Murphy of Detroit
131
132 The Turning Wheel
Thomas Neal of Detroit
James J. Storrow of Boston
Albert Strauss of New York
Nicholas L. Tilney of New York
James N. Wallace of New York
These gentlemen elected James J. Storrow as interim
president while making up their minds as to his successor.
Mr. Storrow, fortunately, was a man of great force and
vigor, and, in addition, he was somewhat automobile-
minded, continuing his interest in motors until his death
many years later. Under him the work of reorganization
got away to a swinging start. Almost immediately it was
decided to dispose of Seager Engine, Welch-Detroit, Mich-
igan Auto Parts, the National Motor Cab Company, and
Ewing. The board acted with equal promptness to clarify
the financial structure by purchasing stocks in various other
General Motors enterprises which had accumulated in
Buick's treasury during the hectic days when Mr. Durant
was buying properties with any funds available.
Having weighed the situation, Messrs. Storrow and
Strauss, whose union of interests dominated the board of
directors, selected Mr. Thomas Neal of Detroit as presi-
dent. Mr. Neal was president of the Acme Lead and Color
Works, one of Detroit's successful industries, and had a
high degree of business sagacity. Standish Backus, a young
lawyer, became secretary and James T. Shaw, treasurer.
It was a distinctly Detroit management. Mr. Durant was
retained on the board and given the important post of chair-
man of the finance committee which he held for a year.
Banker control from the Atlantic seaboard had its dis-
couraging features for the practical men who were bear-
ing the company's burdens in plant and field. Banker
Strauss desired to move machinery from the Welch-Detroit
plant to the Marquette plant in Saginaw by water, having
discovered that both plants were near the waterfronts of
their respective cities. It took a statistical report to demon-
strate to him that moving cargo from shop to shore would
cost more than the direct rail haul from one factory side-
track to another.
The Bankers Take the Wheel 133
For two years expansion had been the watchword, with
efficiency of operation a minor consideration. Inventories
were woefully out of balance; improper storage of supplies
had caused great waste. In one plant thousands of tires
were found exposed to heat and sunlight; in another valu-
able machinery lay rusting out of doors. Tons of unsaleable
merchandise had been built to faulty specifications or of
faulty materials. However, new managers, grappling with
these discouragements, soon brought improved order and
spirit into plant operations. These readjustments required,
of course, considerable time, and an immense amount of
THOMAS NEAL
patient, detail work on the part of plant managers and
their staffs.
During the two flush years of General Motors life, man-
ufacturing, sales, and accounting had not kept pace with
growth of volume. The new management accordingly began
to coordinate policies and to put into use standardized ac-
counting and reporting. Henceforth, at least, General
Motors would know how its cash position stood from day
to day. It set up the General Motors Export Company, a
Michigan corporation with $10,000 capital, to handle all
General Motors products in the foreign field, this being
perhaps the first operation in which General Motors pre-
sented a completely united front. A General Motors maga-
zine, the Insider, made its appearance, the first of many
corporation publications designed to spread the General
134 The Turning Wheel
Motors message among its own people and advance the
solidarity of the enterprise. An experimental and testing
laboratory was set up. New managers were installed in
many plants. Economy became the watchword, and under
that banner began thorough reform.
There was plenty to be done. In the mopping-up process
the following central office projects were wound up:
General Motors Securities Company.
General Motors interest in United Motors Company
sold to United States Motor Company, the rival hold-
ing company organized by Benjamin Briscoe. A little
later the Company's interest in United States Motor
Company was written down to $i.
Efforts to sell the Company's interest in Seager Engine
failing, that asset was also written down to $i.
Ditto with the Maxwell-Briscoe interest.
These decisions took some time to mature, but in 1914,
by the process of dissolving the subsidiary corporations,
General Motors finally rid itself of Randolph, Peninsular,
and Welch-Detroit. It sold the Reliance plant at Owosso
to the American Malleables Company, and the Michigan
Motor Castings Company was absorbed by Buick.
Elmore's capital stock was reduced from $60,000 to
$6,000. As the spare parts business of both Elmore and
Peninsular had been sold for $44,000, the Elmore write-
off to $6,000 placed a bargain price on the Clyde, Ohio,
plant. In five years the value of the Elmore investment
had shrunk from $600,000 to $6,000 in the ratio of $100
to $i, at a time when the automobile business was generally
prosperous and the Elmore car was considered thoroughly
creditable. Actually, the plant sold for $50,000 when a
buyer for it appeared some years later.
It will be noticed that in this period of retrenchment
General Motors concentrated on Michigan producers, a
trend applicable to the entire industry, as it advanced in
age and capitalization. Although in later years the Cor-
poration widened its activities geographically with excel-
lent results, the great automobile producers in its orbit still
The Bankers Take the Wheel 135
have their chief plants and operating headquarters in
Michigan.
Hopes being still held out for Rainier, General Motors
increased its holding in the Saginaw company by $110,000
of stock, paying about half in cash and half in surrender
of claims. Full ownership of Rainier was completed on
May 2Qth. Another move with enduring results was the
incorporation of General Motors Truck Company on July
22, 1911, as a sales company to handle the product of
Rapid Motor Vehicle Company of Pontiac, Michigan and
Reliance Motor Truck Company.
The most hopeless task of all remained in the liquidation
of the Heany assets. Mr. Durant, seeing the white light
of truth where once he had seen only the rosy dawn of
mythical profits, reported adversely on Heany at the meet-
ing of May 15, 1911, and the board resolved to grant
Heany no further advances. The Heany plant at York,
Pennsylvania, was of small value compared with the
prospective value of Heany's patents, now seen to be in
jeopardy when carefully weighed in view of the General
Electric suit.
The Heany fiasco cost General Motors enormously,
estimates running from $5,000,000 to $12,000,000. Its
denouement marked the withdrawal of Mr. Durant from
the chairmanship of the Finance Committee on November
n, 1911, when he was succeeded by Mr. Storrow. Mr.
Durant, although remaining on the board, was now entirely
divorced from the management and devoted his energies to
founding Chevrolet, on which he again rode into power
four years later. He remained, however, a director.
General Motors voting trust certificates, the share for
share equivalent of the deposited Common shares, were
listed on the New York Stock Exchange on July 31, 1911,
the first automobile securities listed by that body. That list-
ing meant that stockholders and the public generally hence-
forth would have clear statements of the company's financial
position at regular intervals, and it therefore became part
of the management's plan to rebuild public confidence in
General Motors' structure. At this time the net worth of
136 The Turning Wheel
the company was approximately $35,000,000, although the
authorized capital was $60,000,000.
The banker management, even at that early date, caught
the significance of the relationship of corporate financial
responsibility to automobile sales. The automobile buyer,
more definitely than the consumer in other lines of mer-
chandise in general use, seeks reassurance of the manu-
facturer's stability, because the service he receives and the
resale value of his car alike depend unmistakably upon the
continuance of the manufacturer in business. General
Motors' position in this respect suffered a body blow from
the uncertainties reigning during the height of the busy
selling season in the midsummer of 1910, and every effort
to reestablish confidence was a step toward better sales.
Banking opinion had been satisfied at once by the character
of the new board, and this confidence worked its way down
again to the sales staffs and the buying public. More
efficient plant management was steadily improving the
quality of the cars offered, and as the feeling grew that
General Motors had escaped its Waterloo, business im-
proved. The tide turned faster than the conservative men
at the center of things fully realized. Although they were
paying off the trust notes regularly and adding to surplus,
General Motors stock was offered for sale to several of
the officers in 1911 with no takers. But W. C. Durant
watched the situation out of the corner of his eye, con-
sidered the stock ridiculously undervalued, and as he could
find the means, began to buy back toward control.
One factor in the upturn was the growth of the export
business. The capital of General Motors Export was in-
creased in January, 1912, from $10,000 to $100,000. An-
other transaction of moment was the purchase of the
remaining outstanding shares of Weston-Mott from C. S.
Mott. This transaction which involved also 3,000 shares
of Brown-Lipe-Chapin stock and several notes, totalled
more than $2,000,000. Brown-Lipe-Chapin, manufacturing
gear differentials at Syracuse, New York, later became a
division of the Corporation.
General Motors of Canada, a sales unit, was born with
a capital of $10,000 and General Motors completed its
The Bankers Take the Wheel 137
ownership of Cartercar. Great things were expected of Car-
tercar, a friction-drive car. It occupied the former site of the
North and Hamilton carriage factory in Pontiac, and had
as president George E. Daniels, who will be remembered
as the first nominal president of General Motors Company
and later head of Oakland. But Cartercar, in spite of its
early promise, soon faded from view. The friction drive
simply could not be popularized, and the chance for it had
passed with the rapid improvements in gear shifting.
Engineering improvements came along swiftly, and Gen-
eral Motors' priority in some of these hastened the recov-
ery. Buick introduced its first closed car — a limousine — in
1911. Other improvements were the electric horn, slip de-
tachable rings, and the worm-gear drive for trucks. But
the greatest mechanical triumph of the period was Cadillac's
introduction of the Delco electric starter, described in the
Insider in 1911, to become standard equipment in 1912.
This epoch-making achievement opened a new market for
automobiles by making motoring cleaner, safer and easier,
and, in particular, met the driving needs of women, result-
ing in a striking market advance.1
The process of shearing off disappointing properties and
consolidating others continued. Buick's Jackson plant was
sold to Imperial Wheel, and Michigan Auto Parts went
to Northway. Welch-Detroit, of which the Company had
long been weary, went to the Peninsular Motor Company.
Into the Peninsular shell had now been poured three com-
panies— Rainier, Marquette, and Welch-Detroit. It was a
grand property physically but had little luck until it went
finally to Chevrolet.
The 1911 figures reveal the young giant twisting in the
coils of bitter circumstance but making headway. Net sales
were off nearly $7,000,000 and net income cut to a third
of 1910 profits — only $3,316,251 was available for divi-
dends and reinvestment. For a true comparison the latter
figure needs enlarging by one fifth as in 1911 the close of
the company's fiscal year was pushed ahead to July 3ist.
Even so, the shrinkage was large. Nevertheless, the Pre-
ferred dividend was paid promptly, and as the Common
'See Chap. XIX: "Research: the March of the Open Mind."
138 The Turning Wheel
stock had never paid a cash dividend the company's credit
held firm. Pay rolls began to creep up, the number of em-
ployees advancing from an average of 10,000 to 11,474.
Through this period of reorganization Buick had made
extraordinary progress under Charles W. Nash and his
CHARLES W. NASH
works manager, Walter P. Chrysler. Both were extraor-
dinary men, self-made, strong-willed yet versatile, possess-
ing qualities of leadership, financial acumen, and shrewd
market wisdom.
Charles W. Nash had risen from manual labor to be
general superintendent of the Durant-Dort Carriage Com-
pany. In Flint they say he began his rise by mowing a lawn
so well that Mr. Durant noticed his thoroughness and gave
him a steady job at the factory, polishing lamps at seventy-
five cents a day. If Durant had taken Mr. Nash into Buick
with him in 1904, the whole history of General Motors
might have been otherwise, but Nash remained with
Durant-Dort. However, Durant recommended Nash to
James J. Storrow for the Buick post in 1910. That Mr.
Storrow accepted this suggestion proves his openness of
mind, for Mr. Nash lacked automobile experience, and even
those who knew and respected his ability wondered how he
The Bankers Take the Wheel 139
would fare in so novel an assignment. But if "Charlie"
Nash did not know motor cars, he knew men and he knew
factory organization. In a matter of months after taking
hold, Buick was functioning efficiently, rolling up a record
so outstanding that in November, 1912, he was the
unanimous choice for the presidency of General Motors.
Mr. Nash was fortunate in having Walter P. Chrysler
with him during this period. Mr. Chrysler's rise is one
which richly deserves all the notice it has received, but the
story is so well known that it need not be repeated here.
A product of Western railroading, he was brought by Nash
to Buick from the American Locomotive Works at Pitts-
burgh. A genius at plant organization, he soon lifted that
burden from Mr. Nash's shoulders, and when Mr. Nash
became president of General Motors, Mr. Chrysler suc-
ceeded to the chief responsibility of Buick, there to remain
until 1920.
In the nearly four years of the Nash leadership, General
Motors made a remarkable financial "comeback." Good
earnings enabled the Company to anticipate notes, add to
surplus and enlarge plants. For 1912 earnings held steady,
but in the next year more than doubled on a 30 percent
increase in sales, sure evidence that the reorganized Gen-
eral Motors was finding itself as an efficient manufacturer.
But an even more striking index of growing efficiency is
to be seen in the ratio of net sales to number of employees.
In 1913 each employee of General Motors produced on
the average $4,236 in net sales value; in 1914, when there
was a considerable drop in employment but only a small
drop in sales, the average was $6,037.
From 1913 to 1916 inclusive General Motors earned,
available for dividends, nearly $58,000,000, doubling its
profits each year from 1914 to 1916, as follows :
$ 7,249,734 in I9H
$14,457,803 in 1915
$28,789,500 in 1916
While this astonishing earning power reflects the general
prosperity of the country in the "munitions boom," following
140
The Turning Wheel
the onset of the World War in Europe, it also reflects the
outstandng fact that General Motors plants and sales
systems had been thoroughly reorganized and were ready
to go ahead with the general improvement of business.
WALTER P. CHRYSLER
During these three busy years net sales rose from $85,-
373,303 in 1914 to $156,900,296 in 1916 and the amount
reinvested annually in the business from $6,201,055 in
1914 to $17,010,437 in 1917, while the average number of
employees rose from 14,141 to 25,666.
At the beginning of this run of luck and good manage-
ment combined, the price of the Common stock as repre-
sented by voting trust certificates still hung around $25 a
share. Common stock began to appreciate in the spring of
1914, doubled in value before the New York Stock Ex-
change closed at the opening of the World War, and gained
persistently thereafter, eventually reaching a high of $852
a share. When the present Delaware Corporation was
formed in 1916 it exchanged five shares of the Common
stock for one share of the Common stock of the New
Jersey Company. Owing to stock dividends and divisions,
The Bankers Take the Wheel 141
each share of the old Company Common equals roughly 100
shares of Corporation Common and was worth in Novem-
ber, 1933, $3,000. At the peak price of 1929 one share of
the old Company Common was worth more than $9,000.
There was no headlong expansion, however, on the basis
of improvement. The only substantial capital increase in
1913 was that of General Motors Truck Company capitali-
zation from $10,000 to $250,000. Elmore, Peninsular and
Welch operations were wound up. With their passing the
General Motors passenger car units had been whittled
down to Buick, Cadillac, Oakland, and Oldsmobile, and of
all the truck units absorbed by General Motors in its period
of great expansion only one remained: General Motors
Truck Company.
General Motors had developed a clear outline by the
time the banker reorganization was complete. It would
grow tremendously, of course, and add many units, but they
would be chiefly accessory and parts companies supplying
the great automobile manufacturing establishments which
dealt directly with the public. Never again would General
Motors give substantial evidence of a desire to acquire a
leadership in the industry based merely upon buying com-
peting companies. Fear of monopoly aroused by swift early
expansion had been allayed and never reappeared. Hence-
forth General Motors would strive for a larger share of the
automobile business of the country, not by buying up com-
petitors, but by improving the output of its four great
producers, to which Chevrolet would soon be added as a
result of an extraordinary situation which no policy could
foresee. This in the passenger car field; as other opportuni-
ities developed, purchases of corporations in those fields
were made and, of course, the whole supply and service situ-
ation has been rounded out.
The point is that the general plan of 1913, which ultra-
conservative men worked out under the pressure of neces-
sity, still stands, though still subject to revision as circum-
stances dictate. General Motors' evolution from a holding
company to an operating company, while not completed
for several years, was begun under banker control, and the
greater part of its expansion since has been through the
142 The Turning Wheel
growth of its leading component divisions rather than by
purchase of rival companies. The country consequently no
longer thinks of General Motors as a horizontal trust cap-
able of infinite expansion until it dominates the essential in-
dustry of vehicular transport, but rather as an organization
with certain trust features of advantage but still subject to
the restraints and incentives of competition.
As it stands, General Motors is neither a vertical trust
nor a horizontal trust, but in adapting itself to large scale
production in a land where competition is estimated the life
of trade, it has taken on certain aspects of both horizontal
and vertical organization, an adjustment dictated by the
necessities of cooperation on the one hand and by a deter-
mination to avoid even the appearance of monopolistic in-
tent on the other.
For the beginnings of this sane evolution the bankers
who ruled General Motors from 1910 to 1915 are re-
sponsible. How that control passed, amid scenes and circum-
stances of intense drama, will be told in the two chapters
to follow.
Chapter X
CHEVROLET: THE CINDERELLA OF
MOTOR-CAR HISTORY
T
LH
HE rise of Chevrolet is one of the epics of American
industry, with almost fairy-tale aspects. Like Cinderella,
Chevrolet rose from the ashes, went to court, was cheered
by the populace, married and lived happily ever after.
We have seen that Buick began its Flint career at the
western end of Flint in the Flint Wagon Works Plant ; also
that while new buildings rose in northern Flint to house
the amazing growth of that company, only one Buick
structure stood in western Flint. Buick motors were still
being made in this old or No. 2 Plant, while across the
tracks Flint Wagon Works engaged in turning out a few
of the Whiting cars. All of these buildings have since been
demolished to make way for larger plants of Chevrolet.
In 1909, Louis Chevrolet, bearing a name destined to
become a household word in America, was experimenting
on a small car in Detroit and also with a six-cylinder one.
He was being financed by W. C. Durant who had employed
him as a racing driver several years before. Chevrolet was
a picturesque figure in his racing days, as he brought Buicks
down the stretch with his huge Gallic mustache blowing in
the wind. When Louis and his brother Arthur came to
Flint, Mr. Durant tried them out on a small dirt track
maintained by Buick in the rear of its factory. Louis won
the contest, and was chagrined when Mr. Durant immedi-
ately selected Arthur as his personal chauffeur on the
ground that Arthur had lost by taking no chances while
143
144 The Turning Wheel
Louis Chevrolet had won by taking all chances. Both Chev-
rolets became members of the famous Buick racing team
which contained Bob Burman, Louis Strang and other
celebrities. But Louis Chevrolet had talents beyond mere
speed; he had ideas about design. He considered that
America, with improving roads, would receive favorably
a light car which, like the French favorites of the day,
The first Chevrolet, built in April, 1913, has traveled 237,462 miles
combined beauty with modest price. This idea appealed to
Mr. Durant who accordingly backed the Chevrolet experi-
ments in Detroit.
In 1910, Mr. Durant lost control of General Motors.
In the retrenchments which followed, Buick No. 2 Plant
was abandoned and motor operations moved to the north
end of Flint. Flint Wagon Works had discontinued man-
ufacturing the Whiting car, and as the carriage business
showed a steady decline under the competition of the rising
automobile trade, Mr. Whiting was anxious to liquidate
his company. The opportunity came. Proving that one
setback was not enough to keep him out of the automo-
bile industry, Mr. Durant bought the Wagon Works
property, plant and contents, and organized the Little
Motor Car Company to occupy the property. The com-
pany was named for William H. Little who had been
general manager of Buick under Mr. Durant. Mr. Little,
Charles M. Begole, and William S. Ballenger signed the
articles of incorporation as of October 30, 1911. Capital
Chevrolet 145
stock authorized was $1,200,000 — $700,000 Common and
$500,000 Preferred. Stock subscribed was declared to be
$615,600 Common, and $207,600 Preferred. Only $4,-
827.42 is represented as paid in cash, the balance being
paid in real estate and materials, inventory, etc., the value
of the Wagon Works plant being set up at $350,000. The
Preferred stock was paid in exchange for Wagon Works
machinery, equipment, and accounts and bills receivable.
Little, therefore, started from scratch, with an old plant
full of horse-drawn vehicles and mortgaged to Mr. Whiting
for $200,000. When it is recalled that Little became the
foundation of Chevrolet, and Chevrolet grew to larger
volume than any other motor manufacturer in the world,
industrial history has nothing to match the march from
poverty to power.
Little Motor Car Company at first built only one model,
a small four-cylinder runabout, selling around $650, which
placed it in competition with Ford. It was attractively de-
signed, but weakly powered.
The Wagon Works plant was in confusion. The problem
facing the management was selling a large inventory of
carriage parts and work in process at the same time that it
rehabilitated the property for automobile production. In
the meantime Louis Chevrolet continued in Detroit his ex-
perimental work on four- and six-cylinder cars, the "six"
being known as Model C which was finally accepted as
ready for production. A plant was rented on West Grand
Boulevard, and there the first Chevrolet cars were pro-
duced for the market.
On November 3, 1911, the Chevrolet Motor Company
of Michigan was organized with Louis Chevrolet, William
H. Little and Edwin R. Campbell as incorporators. Up to
that time, Chevrolet had built only four or five experi-
mental cars, and the new company's production in Detroit
was never large. A sensation was created in Detroit real
estate circles when vacant property was purchased directly
across from the Ford factory and a large billboard was
erected saying that a complete modern plant would be
built on that location. This was never done, however, as it
was soon seen that quantity production could be more
146 The Turning Wheel
economically effected in Flint where considerable strides
had been made.
The most important of these was the incorporation of
the Mason Motor Company on July 31, 1911, with Arthur
C. Mason, Charles Byrne and Charles E. Wetherald as
incorporators. Followed by a large number of former Buick
Chevrolet "Royal Mail" roadster, 1914
employees, with amazing speed they began motor produc-
tion in the old Buick No. 2 Plant rented for the purpose.
There, as contracted for, the motors for both the Little and
Chevrolet cars were built by the Mason Motor Company.
Mr. A. B. C. Hardy succeeded William H. Little as gen-
eral manager of the Little Motor Car Company at Flint on
January 21, 1912. Mr. Hardy found the plant still full of
everything for farm use from wagons to whip sockets.
The Little mortgage was very tightly drawn. It had to be
reduced in certain proportions as any building or machinery
item was changed or moved, with the Whiting interests
consulted at each step. Mr. Hardy says that only $36,500 in
new cash was put into the Little Company of which $10,000
represented the claim which the Weston-Mott Company
had against the Wagon Works for axles.
Mr. Mott's willingness to take our stock was a real help and gave
us all courage. As part of the deal, we were bound to pay off all
debts of the Wagon Works, so the problem I faced was that of
Chevrolet 147
turning a set of old fashioned carriage buildings into an auto-
mobile plant on only $26,500, getting the rest of the money out
of the sales of horse-drawn vehicles and their parts. For the first
year we were in several kinds of business at the same time.
Our plan was simple to the point of innocence. We took the
small motor, had it revamped and improved by Mason and put it
into a small roadster for sale for $650 which was somewhere
near Ford's latest price. The Little had good lines but was under-
powered. Nevertheless, we sold 3,500 Littles in my first year and
also made up and sold several thousand buggies, many thousand
sets of wheels and a raft of miscellaneous carriage parts and ac-
cessories. All this in addition to putting the plant in fair shape for
the production of automobiles. We made all of our bodies and
most of our sheet metal parts.
Mr. Little spent most of his time in Detroit where Chev-
rolet was getting into small production. Chevrolet sales
offices were opened in Chicago, Philadelphia and Boston,
these three being the first of many retail stores later
operated by Chevrolet. Its large six-cylinder car was priced
at $2,500 and upwards. The capital for the Detroit opera-
tion came largely from material and parts suppliers. The
plant in which Chevrolet operated on West Grand Boule-
vard in Detroit had been taken over from Thomas Cor-
coran, a lamp manufacturer of Cincinnati. For those days
it was an exceptionally good plant, even luxurious from the
standpoint of offices, and there Mr. Durant made his head-
quarters for a considerable time.
The production record hung up at the Little plant in
Flint, however, far exceeded what had been done in De-
troit. The Flint enterprise actually was making money,
while the Detroit operation was losing it. Consequently,
Mr. Durant planned a much heavier schedule for Flint
during 1913 based on a production of 25,000 four-cylinder
Littles and the introduction of a six-cylinder Little ; but the
25,000 figure was reduced to 5,000, and orders were placed
for materials on that basis. A small assembly plant had
been leased at the corner of 57th Street and nth Avenue,
New York City, to which parts were sent to be assembled.
The matter of financing these shipments was disputed
between the Flint and Detroit organizations which were
148 The Turning Wheel
separate corporations with different sets of stockholders.
Messrs. C. M. Begole and W. S. Ballenger of the Wagon
Works remained active in the Little Company, which suc-
ceeded in paying off its floating debts, reducing its mortgage
very considerably, and building up a small surplus — not
enough, however, to finance extensive shipments to New
York and Detroit.
The logic of the situation indicated the advisability of
concentrating the manufacturing at Flint. Consequently,
the Chevrolet Motor Company of Michigan discontinued
operation in Detroit and moved from there in August,
1913. For a time Chevrolet occupied the old Imperial
Wheel Company plant on property now owned by Buick.
General management of both the Little and Chevrolet com-
panies was given to A. B. C. Hardy. All former sales
offices were retained. Mr. Durant further consolidated his
Flint position by extending his interest in the allied Mason
Motor Company.
The year 1914, which was to inaugurate the World War
and witness the revival of general business activities in the
United States, found both the Little and Chevrolet cars
in production in Flint. Chevrolet introduced its famous
Baby Grand touring car and Royal Mail roadster. The
organization had become highly efficient through the neces-
sity of making its own way on very little capital. The used
car problem had not yet developed and instalment selling
was still in the future. Chevrolet could sell for cash every
car it produced. So great was the demand that if a shipment
was not taken off the railroad track promptly by the con-
signee, someone else in the community could be depended
upon to lift it without delay. As the money rolled in, Mr.
Durant transferred his offices from Detroit to New York to
push sales from that center and also to work out a plan
which he had formed for recovering control of General
Motors. The latter had snapped back into prosperity under
the Nash management. Profits were large, interim pay-
ments on its funded debt were made promptly, and large
reserves accumulated. Yet, no one of the Eastern bankers
seemed to appreciate the full potential value of General
Motors as thoroughly as did Mr. Durant.
Chevrolet 149
Chevrolet expansion went on at top speed. During 1915
the Little Motor Car Company discontinued production.
Following an exchange of real estate, all Chevrolet opera-
tions were concentrated in the western end of Flint. The
Baby Grand touring and Royal Mail roadster, volume
cars from the beginning, ran into large production.
The selling force took decisive steps forward. In 1914
a wholesaling organization had been opened in Oakland,
I .• !•• ^
Model 490, Chevrolet — the basis of the present Chevrolet
California. In the following year wholesale offices, the first
of the Chevrolet zones, were opened in Kansas City and
Atlanta. Agreements were made with Russell Gardner, Sr.,
for the assembling and sale of the Model 490 in St. Louis
territory, and with R. S. and G. W. McLaughlin for similar
production and sale in Canada. Chevrolet had no financial
investment in either company, but had a profit-sharing con-
tract. Chevrolet entered the Eastern production field with
the "490" by buying the Maxwell Motor Company plant at
Tarrytown, New York, the New York City plant being con-
tinued for production of Baby Grand and Royal Mail
models. Most of the assembly operations were set up with
the assistance of local capital, with the result that the still
rather small Chevrolet Company bloomed into a nation-
wide operation in a remarkably short space of time.
150 The Turning Wheel
Chevrolet Motor Company of Delaware, through which
W. C. Durant regained control of General Motors by an
exchange of stock, was incorporated in Delaware on Sep-
tember 23, 1915, with a capital of $20,000,000, raised to
$80,000,000 the following December. With very broad
powers, including the right to hold, own, and deal in securi-
ties, it acquired all the stock of Chevrolet Motor Company
of New York, Chevrolet Motor Company of Michigan,
Chevrolet Motor Company of Bay City, Chevrolet Motor
Company of Toledo, Ohio, Mason Motor Company of
Flint, with contract interests in Chevrolet Motor Company
of Canada, Ltd., Oshawa, Ontario, and Chevrolet Motor
Company of St. Louis.
The officers were R. H. Higgins, chairman of the board;
L. G. Kaufman, chairman of the Finance Committee;
W. C. Durant, president; A. B. C. Hardy, vice-president;
E. R. Campbell, second vice-president; W. C. Sills, treas-
urer; J. T. Smith, secretary. Among the directors were
H. M. Barksdale of Wilmington, Delaware, a du Pont
representative, and L. G. Kaufman, president of the
Chatham Phenix Bank, New York City. Mr. Kaufman en-
tered Chevrolet financial councils through his ready accept-
ance of Chevrolet loans at the instance of Nathan Hof-
heimer who had been a large stockholder in the Heany en-
terprises, and who followed Mr. Durant into Chevrolet.
The balance sheet of December 31, 1915, showed net
working capital of $7,368,572 and capital stock outstand-
ing of $19,752,300, which had been increased to $23,663,-
800 on February 29, 1916, as a result of the stock transfer
previously outlined.
Before demonstrating his control of General Motors
through Chevrolet, Mr. Durant offered a proposition to
have Chevrolet taken into the General Motors family as a
unit. That declined, a show of strength was necessary. Cin-
derella Chevrolet stepped forth in her new-won splendor
to the applause of the multitude.
Chevrolet Motor Company of Michigan took over the
capital stock of the Mason Motor Company. The year
1916 saw Chevrolet still expanding. A new assembly plant
was built at Flint and another started at Fort Worth, Texas.
Chevrolet 151
The Mason Motor Company increased its motor manufac-
turing space at Flint. A new axle plant was also added. Two
notable purchases had been made of properties which
greatly enlarged Chevrolet's manufacturing resources. The
National Cycle Company and the National Motor Truck
Company at Bay City, Michigan, were purchased for small
parts production and Warner Gear Company at Toledo,
Ohio, for transmission and gear production. Retail stores
were opened in many cities. Chevrolet assembly began at
Oakland, California. A profit of $278,000 was derived
from sale to the Ford Motor Company of Highland Park
property bought five years before. Additions to the manu-
facturing, assembling, and sales facilities came fully in use
in 1917 and made that year notable in spite of the difficul-
ties which manufacturing in general encountered through
the participation of the United States in the World War
and the setting up of quotas on materials.
Chevrolet leased an eight-story office building at 224
West 57th Street (1764 Broadway), New York City, and
moved the executive offices to that location on December I,
1917, later exercising an option to purchase. In preparation
for its absorption into the General Motors Company,
Chevrolet in 1918 began to buy the outstanding stocks
held locally in its enterprises in various sections of the
country, and their several production and sales agreements
were cancelled out in this way at figures highly profitable
to the local investor. In 1918 General Motors purchased
all the assets and assumed all the liabilities of Chevrolet
Motor Company (Delaware).1
In all American industrial history there has never been
anything to equal the rise of Chevrolet from an experiment
in 1910-11 to the position it held when merged with the
General Motors Corporation in 1918. It had made $6,000,-
ooo in six years and had amazed the automobile world by
securing control of General Motors Company of New
Jersey. Moreover, it had worked out a broadly based sys-
stem of production and nation-wide assembly upon which
it could build its quantity leadership of the future. Starting
with almost no cash and an antiquated plant, Chevrolet's
^or later history of Chevrolet, see Chap. XVI.
152
The Turning Wheel
swift and dazzling ascent to profit and power caught the
attention of the country. How Cinderella Chevrolet came
to the court of public opinion unheralded and unsung, to
ride away in her coach-and-six to the cheers of the popu-
lace, will be told in the following chapter.
Chapter XI
THE CORPORATION ESTABLISHED
I
N ITS lusty youth the automobile industry displayed
strong resistance to the down swings of the business cycle.
When banks were failing in 1907, and many sections had
only scrip for a circulating medium, the automobile cities
of Michigan hardly knew that distress was stalking the
land. Pessimists were always talking of the "saturation
point" but conveniently it kept receding.
Business in general began to slow down in 1913, but
General Motors' reorganization had given the Company
such momentum that its earnings kept rising. Likewise,
Chevrolet passed swiftly through infancy into assured
earning power. The situation had all the elements of drama ;
indeed, one could be sure of drama wherever William C.
Durant concentrated his attention. On the one hand stood
the organizer of General Motors, bereft of power in his
old enterprise, but already in the field with a new, expanding
venture, built on a "shoe string" in the sense of capital
structure but paying its way, growing through earnings, the
bright faith of its captain and his uncanny ability to find
capital when it was needed. On the other hand stood Gen-
eral Motors, directed by more conservative men, with the
power of ultimate decision resting in bankers more inter-
ested in getting the Company out of debt than in taking
unnecessary risks.
Sometimes the conservative view is really the short view,
the optimistic, the long view. It proved to be so in this
'S3
154 The Turning Wheel
case. With their eyes on the ledgers rather than on the
future, the bankers never quite comprehended the potential
value of General Motors. Having mopped up the debris of
the initial expansion they failed to grasp the importance of
what remained in General Motors after the house-cleaning
had been done. Few realized that General Motors' earning
capacity far outran its debt commitments, and among those
few was the man who had founded the company. W. C.
Durant began buying General Motors.
In his market campaign for control from 1913 to 1915,
Mr. Durant proceeded from the firm base of a large
personal interest in the stock. He had sold none of his
original holdings. Members of his family held large blocks.
Other blocks were held by old friends and business asso-
ciates who had clung to their holdings through the period
of falling prices for the stock. Mr. Durant's liberality in
buying companies for stock had endeared him to bene-
ficiaries upon whose loyalty he could rely.
Altogether there was, both in property and sentiment,
the basis for considerable buying, credit being comparatively
easy. General Motors certificates trebled in price by the
time the New York Stock Exchange closed at the outbreak
of the World War and, when the Exchange opened four
and a half months later, General Motors was one of the
few stocks to have appreciated in the interval. Thereafter
the stock rose in value rapidly as the munitions boom gath-
ered headway. The World War played into Durant's hands
by bringing new money and new men into the stock market,
and by stimulating confidence in business. While it was gen-
erally understood that Durant was buying, the Street was
skeptical how far he could go, and the bankers in control
never seemed to have read the danger signals. Their re-
sources, of course, far outweighed those of the opposition, if
they had ever been mobilized for resistance.
General Motors in 1915 was a rich prize. The statement
of July 3 ist, of that year, shows net working capital of
$31,141,238, cash of $15,527,124, and net profits for the
year of nearly $15,000,000. Only $2,328,000 of the
$15,000,000 gold notes issued in 1910 remained unpaid,
The Corporation Established 155
the mortgage debt having been reduced by approximately
$1,000,000 in the fiscal year ending July 31, 1911 ; $1,500,-
ooo in 1912; $1,500,000 in 1913; $3,000,000 in 1914; and
$5,500,000 in 1915. By comparison Chevrolet was still a
pigmy yet plans were afoot to have little Chevrolet gain
control of the General Motors giant.
This, of course, had to be done carefully. The campaign
was cleverly timed, and had support from sources highly re-
spectable. Mr. Durant received substantial banking aid
from Louis G. Kaufman of the Chatham Phenix Bank,
New York. The open market was buying on a tremendous
scale, as is evident from the high and low prices for the
General Motors voting trust certificates representing Com-
mon stock. The range of prices was :
Year High Low
I9H 5iM 35
1912 42% 30
1913 40 25
Then the spread began, with a 1914 low of 37 }i and a
high of 99. Buying for control took the stock in 1915 from
a low of 82 to a high of 558. But unlike so many other
market movements, victory was followed by only a slight
recession and the scoring of a new high figure — low for
1916, 405; high, 850. No matter how rapidly Mr. Durant
and his friends "bulled" the market General Motors stock
remained worth what they paid for it. But, in all prob-
ability, no market campaign which was nothing more than
speculative would have resulted in the recapture of General
Motors control by its founder.
As part of the plan Chevrolet Motor Company of Dela-
ware was organized for $20,000,000, but the papers were
not filed until September 23, 1915. Chevrolet of Delaware
was the horse Durant rode to battle. The word went out,
quietly, that Chevrolet would be traded for General Motors
at the ratio of five to one,1 and those who had followed
aThe offer held until January 25, 1916, when a change was made by which
four shares of Chevrolet Common stock instead of five were exchanged for
one share of General Motors Company of New Jersey Common stock.
156 The Turning Wheel
Durant by investing early in Buick and General Motors
began to send in or bring in their stock for transfer.
Mr. Hardy relates how A. M. Bentley of Owosso brought
in a large brief-case of General Motors certificates to the
Chevrolet headquarters in New York and was willing to
turn them in without even a receipt. Reliance had gone the
way of many other promotions, but Mr. Bentley still had
the General Motors stock with which it had been purchased.
The close friendly relations Mr. Durant had established
with the old stockholders, to many of whom he had sold
stock personally, stood him in good stead now. With the
value of their holdings increasing daily under his market
generalship, with both Chevrolet and themselves rising
richer each morning, they forgot the long wait for dividends
and the temporary embarrassment of the company now
happily cured.
In the final check-up, to be absolutely certain, Mr. Durant
was himself one of four men who passed the certificates
from hand to hand, each one calling out the names, numbers
and holdings. So fortified, the certificates being brought in
in baskets, Mr. Durant entered the stockholders1 meeting
of September 16, 1915 — on the seventh anniversary of in-
corporation— absolute master of the situation. A dividend
of $50 a share on the Common stock was declared by the
directors payable October I5th, one of the most substantial
ever paid by a large American corporation. This dividend
had been earned under the old management, and the in-
tention had been to declare a generous distribution, but out
of deference to the coming of the new management action
on it had not been taken.
The advantages of this disbursement for the victors were
obvious, when the circumstances of the stock accumulation
are recalled. General Motors Common had never paid a
cash dividend, though Preferred dividends had been fully
maintained. To the original stockholders Common had gone
as a bonus, but many of them had bought more Common
in the course of the campaign for control and others,
through the years of adversity, had sacrificed Preferred to
cling to Common with a stubborn faith in the Company's
The Corporation Established 157
earning power. Also, the expense of the campaign had been
considerable, especially for brokerage on Street trans-
actions. Heavy borrowings had gone into the stock, and
bankers behind Durant breathed easier. As the Chevrolet
treasury would receive a huge sum, and part of it would
stay there, Chevrolet changed instantly from an adventure
to a made property.
Before maturing this coup, Mr. Durant is said to have
proposed that Chevrolet be taken as a unit into the General
Motors family, but this was declined. Whereupon the trap
was sprung.
Described as the coolest man in the room during this
momentous meeting, Mr. Durant continued to wear the
velvet glove over the iron hand for some time. On Novem-
ber 1 6th the following directors were elected, representing
the du Pont interests : F. L. Belin, Pierre S. du Pont,
J. Amory Haskell, and John J. Raskob. Among other new
directors were Arthur G. Bishop, president of the Gene-
see County Savings Bank at Flint, and Louis G. Kaufman.
The new board contained strong financial representation.
Messrs. Strauss and Storrow, perhaps seeing the hand-
writing on the wall, had retired from the board in the pre-
ceding June. They were now joined in retirement by Joseph
Boyer of Detroit, president of Burroughs Adding Machine
Company, Robert Herrick, Edwin D. Metcalf, Nicholas
L. Tilney, and Jacob Wertheim. Several survivors of the
old bankers' directorate lingered on, trying to resolve in
their minds the future of this dramatic union of Chevrolet
and General Motors, which to many had all the earmarks
of a corporate mesalliance, since a small, new company had
gained control of a larger and older one, an industrial and
financial giant of the first magnitude.
Pierre S. du Pont was elected chairman of the board, a
position he held for over thirteen years, from Novem-
ber 16, 1915, to February 7, 1929. Mr. L. G. Kaufman took
Mr. Storrow's place as chairman of the Finance Committee.
The Central Trust Company of New York was directed
to cremate "all of the 6 percent first lien five-year sinking
158 The Turning Wheel
fund notes as are hereafter received," the full amount nec-
essary to meet the last of these having been deposited in
advance of their maturity on October i, 1915.
All wondered what Mr. Durant had in mind when he did
not take the presidency immediately. Probably his hesita-
JOHN J. RASKOB
tion in that regard flowed from two sources: his admira-
tion for Mr. Nash both as a man and an executive, and a
desire, noticeable from the birth of General Motors, to
remain in the corporate background and work through
others. During the interval in which control of General
Motors remained vested in Chevrolet, this matter of the
presidency remained in abeyance, but eventually it had to be
faced, and on June i, 1916, Mr. Nash resigned and
Mr. Durant succeeded him.
It is said by men close to the situation, that Mr. Durant
saw Mr. Nash go with regret and that he himself had to
be urged to accept the presidency. There can be no doubt of
the first. The two men had worked together for many years
in the Durant-Dort Carriage Company. The Nash record
in the presidency was a really superb achievement, so note-
worthy as to recommend him. to instant backing in an in-
dependent venture. But in the process of making that record
Mr. Nash had grown to a point where the prospect of sub-
ordinating himself, even in the most silken of controls,
could hardly be attractive. Also as an intensely practical
man who had labored tremendously to correct industrial ills
The Corporation Established 159
due to unrestrained optimism, he dreaded seeing optimism
in the saddle again. Perhaps, too, he was a little chagrined
at the ease with which Mr. Durant had overcome the man-
agement in the recapture. Though urged to stay, Mr. Nash
went his way to new success.
Other members of the old board waited, in the expecta-
tion that the Durant-du Pont alliance would not hold.
There was at least this ground for that expectation: the
du Pont directors, schooled in a big business of ancient
origin and close relations with government, held steadfastly
to certain high conceptions of corporate responsibility to
stockholders and public. They were descendants of an
elder American industrialism, and while intensely alert in
technology and finance, they had never taken their projects
to the public as promotions. The birth pangs of General
Motors, as presided over by Mr. Durant from 1908 to
1910, would have seemed almost incomprehensible to them
if they had been watching closely that dynamic scattering
of stock and accumulation of properties. Now that they
were associated with the most daring promoter of the age,
the question arose how long that association could last.
Rather studied attempts were made to divide the two
camps, but these came to nothing. The du Pont interests in
General Motors grew until it became roughly equal to that
of Mr. Durant and resulted in a sharing of control. In 1918,
through direct or indirect ownership, the du Pont holdings
were approximately 28 percent of the outstanding Common
stock of the Corporation.
The reasons behind the du Pont entry into General
Motors are part of a most remarkable chapter in Ameri-
can industrialism. For generations this gifted family, of
aristocratic French descent, had been manufacturing powder
and other explosives at Wilmington, Delaware, their plant
becoming the chief reliance of the government in every
American war from that of 1812 onward. Although de-
veloping explosives for peace-time pursuits as well, each
war found the du Pont plants expanding at a rate which
rendered their full-time use in peace something of a prob-
lem. Consequently, from the base of explosives, the du Ponts
gradually widened their activities in the direction of general
160 The Turning Wheel
industrial chemistry, building up research staff organiza-
tions which were ever peering into the future for new things
to manufacture.
In the peaceful years before the World War, there were
several forces at work to limit the powder business. The
frontier had vanished under the steady march of popula-
tion, with an accompanying decline in hunting. While the
use of explosives was growing in agriculture and engineer-
ing, du Pont had to divide that trade with several strong
competitors. The feeling grew that the future of its busi-
ness depended upon cultivating close relations with indus-
tries using chemical products, and preferably with the
industry likely to grow both in proportions and in its in-
creasing use of chemical products. The automobile filled
these specifications. It is probable that the du Fonts would
have entered the automobile business in some significant
way even if there had been no World War.
The war, of course, tremendously accelerated this trend.
Almost from the first clash of arms in Europe, orders for
powder and other explosives poured into the E. I. du Pont
de Nemours Company. As the war continued, the volume
of these orders kept increasing, and Allied needs were so
urgent that du Pont expanded its facilities on a large scale
in order to meet them. Large profits resulted as a matter of
course, but always this question arose as the highly con-
servative du Pont organization considered the future:
What is to be done with all these plants, all these work-
men when peace is declared? The du Ponts knew, better
than most, that wars have a way of ending suddenly, and
also that at the close there follows a sharp strain in read-
justing a great industry to the requirements of peace.
Moreover, the du Pont philosophy of employment takes
account of the difficulties suffered by staff and labor
through a forced change of scene and occupation. There-
fore, they decided to make an investment in the automobile
business, taking, as already related, the successful flyer with
Mr. Durant on Chevrolet during his drive for General
Motors control, with immediate recognition in the direc-
torate. Subsequent analysis revealed a firm basis for fur-
ther investment of surplus earnings. The du Ponts also
The Corporation Established 161
had products to supply; still growing, the automobile trade
was distinctly a peace-time business, and the phenomenal
increase in closed cars indicated an expanding market for
paint, varnishes, artificial leathers and other du Pont
products, either then available or in prospect.
The alliance had equal advantage for Mr. Durant. His
brilliant double-barrelled success, first with General Motors
and then with Chevrolet, had commended him to everyone
save the country's most influential bankers. With them he
still needed conservative sponsoring, not from any sus-
picion of his intentions, but because he was thought of as
an optimist easily carried away from a solid footing by the
undertow of dreams. The conservative banker-control of
General Motors having passed in the heat of battle, the
financial world was comforted at seeing the steady and de-
pendable du Pont interests well to the fore when the change
came. Their presence insured that stability would have a
strong voice at the council table.
In particular the du Pont connection gave reassurance to
the financial community that General Motors would con-
tinue, even though its control had been secured by Chev-
rolet. The relation of the two companies for the future
puzzled Wall Street greatly for a time. Jonah having swal-
lowed the whale in perhaps the most startling reversal of
form ever witnessed on the Stock Exchange, it was now
apparent that getting the General Motors whale into the
open again was a matter of importance to investors.
Effecting this transformation took some time, as it in-
volved nothing less than the dissolution of the General
Motors Company of New Jersey. The last year of the old
company's existence saw its Common stock on a regular
quarterly dividend basis, with the first dividend declared
January 5, 1916.
The same meeting began to clear the decks with the sale
of the old Elmore property at Clyde, Ohio, for $50,000, as
heretofore mentioned, and the dissolution of General
Motors of Michigan, organized in 1910 to hold the com-
pany's real estate for the benefit of the trust mortgage. The
Imperial Wheel Company's plant, next to Buick, was bought
162 The Turning Wheel
for $80,000 plus certain Detroit real estate, a transaction
which completed Buick's holding on Hamilton Avenue, the
"front street" of its vast plant at Flint.
After the resignation of President Nash had been
accepted with regrets, Mr. Durant became president on
June i, 1916. He would have preferred remaining in the
background as he had done before and letting someone else
have the place of honor. There were special reasons why
Mr. Durant did not wish to burden himself with the presi-
dency. He disliked being tied down to one duty, and
scarcely had he carried the General Motors battlements
than he began assembling various accessory and parts com-
panies into United Motors Corporation — incorporated
May n, 1916, although negotiations for some of the
properties had been begun the preceding year.
Other fields tempted him in this exuberant period when
fortune and prestige rode high on the wings of success.
Farm transport, tractors, and all sorts of mechanized farm
implements — these took hold of his imagination. Also
gasoline-driven highway construction machinery — some-
thing might be done there. From his first entry into the
automobile world, Mr. Durant naturally took a keen in-
terest in pushing good roads. It was he who started state
Senator H. S. Earle, "Good Roads" Earle, on his career of
highway propaganda which made his name almost a house-
hold word through the Middle West and left enduring
monuments in magnificent highways. When Mr. Durant's
attention riveted itself on a general idea, he seemed to
leap around all its various facets and discover something
practical to do about each of them. Perhaps his very un-
willingness to assume detail executive responsibility came
from a correct reading of his own nature; he may have
seen himself then, as others have since, as one whose out-
standing talent was the gift of seeing opportunities and
starting projects which, once begun, could safely be left to
others. One can perceive in him a creative spirit which would
fret itself against the chains of prudence and tradition,
building on a vast scale gigantic projects which he had
difficulty in managing after they were built. Probably he
would have preferred going on making mergers to being
The Corporation Established 163
president, but the weight of advice and his just pride in his
accomplishment overcame his dislike for routine executive
responsibility.
At the close of its last fiscal year, July 31, 1916, the
General Motors Company of New Jersey owned the entire
capital stock of:
Buick Motor Company, Flint, Michigan
Cadillac Motor Car Company, Detroit, Michigan
General Motors Company of Michigan
General Motors Export Company
General Motors Truck Company, Pontiac, Michigan
Jackson-Church- Wilcox Company
Northway Motor & Manufacturing Company, Detroit,
Michigan
Oakland Motor Car Company, Pontiac, Michigan
Olds Motor Works, Lansing, Michigan
Weston-Mott Company, Flint, Michigan
In addition it owned 62.5 percent of the capital stock of
Champion Ignition Company of Flint and 49.85 percent of
the McLaughlin Motor Car Co., Ltd., of Oshawa, Ontario.
The estimated production capacity of its automobile
plants was given as :
Buick 100,000
Cadillac 20,000
General Motors Truck 6,OOO
Oakland 30,000
Oldsmobile 15,000
The significant items, as a result of the year's operations,
were as follows :
Cash and Cash Investment. .$22,762,574.86
Net Profits 28,812,287.96
Net Working Capital 43,664,671.40
Dividends Paid 1 1,779,122.99
Paid on Debt Reduction 2,328,000.00
On October 13, 1916, General Motors Corporation was
incorporated in Delaware to acquire all the stock of Gen-
eral Motors Company of New Jersey, a basis of exchange
164 The Turning Wheel
being established at one and one third shares of new Pre-
ferred for one share of the old Preferred and five shares of
the new Common for one share of the old Common stock.
The new corporation's capital structure on October 31,
1917, consisted of:
r
Preferred stock: 6 percent cumulative $100 par, $20,-
000,000 authorized, $19,674,800 issued.
Common stock: $100 par, $82,600,000 authorized,
$82,558,800 issued, of which $4,685,500 was in the
Corporation's treasury.
The outstanding stocks, plus their proportion of sur-
plus, in affiliates and subsidiaries now owned by the
Corporation, totaled $1,380,430.73.
There was no funded debt.
John J. Raskob became a member of the Finance Com-
mittee on November 2ist, and a little later its chairman, in
which position he exercised a potent influence for the next
ten years. A man of keen vision, it is said that he took the
lead in interesting the du Ponts in General Motors and
many of the far-sighted plans in the next expansion era of
General Motors may be traced to his initiative. Once more
General Motors began to lop off properties, as in 1910, but
there was a vast difference in the point of view of the organ-
izers in the two periods. In 1910 all had been skepticism
regarding the future of both the Company and the industry,
and at that time the motive was chiefly economy with a
view to debt payments. Now the Corporation, free and
clear of funded debt, was in the hands of hopeful and san-
guine men, ready to expand their business to match the
leaping trade of a country grown so prosperous that not
even the epochal political campaign of 1916 could reduce
automobile sales materially. They were clearing the decks
in order to take on more cargo, razing old structures to
make way for new and larger ones.
The Cartercar plant at Pontiac was sold for $35,000, a
fraction of the sum paid for the enterprise when it seemed
important for General Motors to own basic patents in the
friction drive field, because motor-car design might turn
The Corporation Established 165
in that direction. Other dissolutions were Elmore, Oakland
Motor Car, Ltd., of Canada, the General Motors Com-
pany of Michigan, the three of the Heany companies —
Heany Electric, Heany Lamp, and Tipless Lamp.
By the dissolution of the Buick, Oldsmobile, Cadillac,
Oakland, Jackson-Church-Wilcox, General Motors Truck,
Northway, and Weston-Mott corporations, authorized De-
cember 1 4th, and consummated at the turn of the year, the
General Motors Corporation stood forth as an operating
company with the above divisions, thus completing the
evolution from the holding company of 1908 to the oper-
ating company of modern days. Each of the divisions named
continued to operate independently in the sales field through
its own sales company incorporated in the nominal sum of
$10,000. Their general managers were:2
Buick Walter P. Chrysler
Cadillac W. C. Leland
General Motors Truck . . W. L. Day
Jackson-Church-Wilcox .G. H. Hannum
Northway * A. L. Cash
Oakland F. W. Warner
Oldsmobile Edward VerLinden
Weston-Mott C. S. Mott
Although the old General Motors Company of New
Jersey no longer functioned, its legal existence continued
for some months. On August i, 1917, its outstanding Pre-
ferred stock was retired at $101.75, and the Company itself
was dissolved on August 3 of that year. Its last holding,
56,855 shares of General Motors Corporation Common
stock, was acquired by the Corporation in connection with
a plan worked out to interest valuable employees in the
financial success of the enterprise.
It is in order to review the record of the New Jersey
Company as it passes from the corporate scene. Through it
was effected the first automobile merger. It came on the
scene when the industry was still young and confused and
when the automobile itself was still on trial before the
2Messrs. Chrysler, Leland, Day, Warner, and Mott were vice-presidents of
General Motors; Messrs. Hannum and VerLinden later became vice-presi-
dents. For tenures see Appendix II.
166 The Turning Wheel
public. When it departed, the automobile was an essential
part of life, a reliance in the routine of daily living and also
a dynamic tool, as events in Europe were showing. The
industry's permanence and importance were recognized
alike by the man in the street, the banker, the investor and
the statesman. General Motors of New Jersey was in no
small degree responsible for this change of attitude. It had
weathered as severe financial storms as ever beset a young
industrial merger, and had staged a startlingly profitable
"comeback." Its activities had increased the population of
numerous towns and cities, creating fortunes in the appreci-
ation of land values. It had been free of serious strikes;
wages rose as General Motors grew. The Company had
never been accused of unfair commercial practices to
throttle competition ; through years marked by intense pub-
lic criticism of corporations and numerous government
actions aimed at corporations, General Motors escaped
both attentions without question. It had been the first auto-
mobile company to tap the great banking reservoirs of pub-
lic credit, the first whose securities were admitted to the
Stock Exchange. Its Preferred dividend had been main-
tained through bad days and good and its Common stock
had finally reached a dividend position after scoring sweep-
ing advances as a result of high earnings. No American cor-
poration of the period had passed through a more dramatic
experience or emerged with a cleaner record.
Chapter XII
THE WAR YEARS
A
.MERICA'S declaration of war in April, 1917, forced a
sharp readjustment of objectives on the automobile world.
No one quite knew, at the start, what the government
wanted from the industry in the way of goods or what quan-
tities of raw material would be available for the production
of cars for the civilian market. Large supplies were in
process and storage, but after these had been assembled and
consumed, what could the industry expect to run on? Un-
certainty created anxiety. It was clear that the automobile
would be used in war efforts, but how and when? The
answers to those questions were momentous, particularly
for the inhabitants of cities which had grown rapidly around
the plants and were dependent upon daily work for daily
bread. Ever since 1910 the total number of General Motors
employees had been rising year by year, from 10,000 in
1910 to 25,666 in 1916. The year 1917 brought the first
break in that advance, the number of employees falling
slightly.
With as much speed as was possible in a country so un-
prepared for war both psychologically and industrially, the
government set up a program for war manufacturing which
kept many automobile plants busy, but of necessity there
was a dislocation of activity. While certain plants ran night
and day with increased staffs, others could operate only on
part time, using a limited supply of materials allocated by
government agencies conserving the various goods which
167
168 The Turning Wheel
were needed or might be needed for war purposes. An
automobile production program is an immensely compli-
cated operation, requiring the gathering of thousands of
parts and accurate timing of supply arrivals. Absence of
any one of a thousand parts, or shortage of some raw mate-
rial, may throw out of alignment an entire schedule of
operations involving thousands of men and millions of capi-
tal. By extraordinary efforts many of these difficulties of
supply were overcome, and cars continued to reach the
market with some regularity. With war activities and in-
creased automobile production in the latter part, employ-
ment for 1918 rose swiftly to a new peak of 49,118, nearly
double the names on the 1917 pay roll.
Such cars as came to market were readily sold. Sales
rallied surprisingly after the first shock. Although millions
of young men, the best potential buyers in the light-car
field, were mobilized, and savings were being drawn on
for war loans, nevertheless automobiles continued to sell.
The purchasing power of the country was high as a result
of war inflation and the consequent rise in wages. While
automobile prices rose somewhat in answer to increased
costs, they did not rise in proportion to food and clothing.
The people had money to buy cars, and the automobile fitted
into the high-speed picture of the war years, when time was
the most important element in a life-and-death struggle and
economy was a forgotten word. With millions of men with-
drawn from employment, those at home increased their
activities by using motor cars more freely. The incentive to
save time would carry on long after the war was over and
be one of the factors in the next great advance of the
motor car in popularity. But, for the remainder of 1917 and
the greater part of 1918, automobile production in general
went forward under handicaps.
All General Motors' facilities were, of course, placed at
the government's disposal the instant hostilities were begun.
Of the twenty-three operating units eighteen were engaged
on government contracts. The gross value of war products
actually completed by the Corporation approximated
$35,000,000. War production included: ambulances and
trucks, 5,000; officers' cars (Cadillac), 2,350; artillery
The War Years
169
tractor engines (Cadillac 8-cylinder engine), 1,157; Lib-
erty motors for aircraft work, 2,528 actually completed and
delivered, with orders for over 10,000 on the books when
the Armistice was signed. The Jackson-Church-Wilcox
division, operating an entire plant on trench mortar shells,
reached a production of 20,000 per day. Oldsmobile built
field kitchen trailers. Buick constructed special factories for
the production of the famous Liberty airplane motors. Asso-
ciated plants made shell caps and other munition parts.
Buick war tract or f
It was a proud moment for General Motors when the
Cadillac stock car, as previously noted, after gruelling tests
in the mountainous wastes of the Big Bend country in
Texas, was selected as standard for war use in July, 1917.
With no mechanical changes, but painted khaki-brown,
Cadillacs were standard transport for general officers and
their staffs in the American Expeditionary Force in France.
Cadillacs were also used by officer personnel at army bases
and cantonments in this country. Liberty motors were also
made by Cadillac.
In addition to the completed war orders, large quantities
of war material were in process at the close of hostilities.
Several plants had been constructed rapidly at government
suggestion to accommodate war orders. Such was the in-
ception of the Central Products division on Holbrook
170 The Turning Wheel
Avenue, Detroit, near the Northway division. There a drop
forge plant was rushed to completion in 1918, with a
capacity of fifty tons a day. This plant, soon expanded, be-
came the nucleus of the present Chevrolet group in Detroit.
The Central Foundry plant at Saginaw was also pushed
rapidly forward, 126 acres being purchased for the site.
Mr. Durant tells a striking war story illustrating the
uncertainties of the war years and indicating some of the
sacrifices General Motors made to relieve trying situa-
tions. The Corporation was .requested by the British gov-
ernment to prepare for the manufacture of a new airplane
engine in large quantity. Accordingly property was pur-
chased, construction begun and machinery ordered. After
waiting months for the arrival of the promised sample
engine from abroad, Mr. Durant was informed that noth-
ing could be done. The first engine tested abroad had
functioned perfectly, but others had failed and the plan
was declared abandoned. "Submit your bills," said the
Allies' representatives. "No," said General Motors through
its president, "We will take the loss and try to find another
use for the property. Under the circumstances our stock-
holders are not likely to object." Eventually the commit-
ment was worked off without serious loss to the Corporation.
Meantime, the directors continued putting their house
in order. The union of General Motors and Chevrolet was
at last consummated on May 2, 1918, when General
Motors acquired Chevrolet for 282,684 shares of Common
stock, taking over all assets except 450,000 shares of Gen-
eral Motors Common in the Chevrolet treasury. The orig-
inal Chevrolet shareholders realized a very substantial profit.
Further additions to the roster of General Motors being
contemplated, as well as plant extensions, the certificate of
incorporation was amended twice, raising the authorized
stock of the Corporation to $200,000,000 on March 20,
1918, and to $300,000,000 on August 27th. June 26, pre-
ceding, the president and chairman of the Finance Com-
mittee were authorized to buy United Motors for $44,-
065,000, paying approximately three quarters of that sum
in Preferred stock and one quarter in Common stock.
United Motors had been organized by Mr. Durant, and
The War Years
171
under the presidency of Alfred P. Sloan, Jr., was soundly
administered. Thus Hyatt Roller Bearings, Dayton En-
gineering Laboratories, New Departure, Harrison Radia-
tor, Remy Electric, and Jaxon Steel Products entered the
Corporation, and the assets of Perlman Rim came into the
Jaxon company.
That the directors on July 26, 1918, were optimistic
about the early and successful close of the war may be gath-
ered from the fact that they voted on that day to invest
Barn in Dayton, Ohio; first home of Dayton Engineering Labora-
tories Company., 1909
$1,000,000 in a 40 percent interest in the Doehler Die Cast-
ing Company of Brooklyn and authorized J. A. Haskell to
buy the stock of the Scripps-Booth Corporation of Detroit.
The Scripps-Booth car, a runabout of advanced design,
seemed a desirable addition, but other General Motors
units soon overtook and surpassed Scripps-Booth, in ex-
cellencies of design, resulting in its abandonment.
Midsummer, 1918, saw the World War enter its final
phase, marked by the last despairing German drives which
were finally checked at the Marne. While none knew how
long the war would last, the Corporation maintained as an
objective the quickest possible return to large production as
soon as quota restrictions should be removed.
The World War gave General Motors a decisive turn of
interest toward aviation. Production of Liberty engines
and other essential aviation supplies in its plants emphasized
172 The Turning Wheel
the kinship between airplane and automobile production.
Other manufacturers, not yet in General Motors but with
whom the Corporation had close business relations, were
also participating in the gigantic aviation enterprise of the
government. Fisher Body, with a vast quantity production
program under way, was building DeHavilands in its great
Number 18 plant at Detroit; likewise the Dayton industrial
grouping led by Mr. Kettering. The Dayton-Wright Air-
plane Company, the spearhead of the Dayton aviation
effort, turned out completed airplanes for a time faster
than any other company has done before or since. On Sep-
temper 25, 1919, General Motors bought all outstanding
shares of Dayton Metal Products Company and certain
assets of the Dayton-Wright Airplane Company, as well as
other Dayton interests.
The post-war situation, however, proved discouraging to
aviation, as the chief customer, the government, severely
curtailed its buying. The market was saturated with planes
and materials. It seemed that years must elapse before avia-
tion would take its place as a self-sustaining industry; in the
meantime, development would proceed largely through the
assistance of government buying for military purposes and
government subsidies on mail contracts. Accordingly Gen-
eral Motors, while still acutely aware that aviation was a
kindred industry, felt constrained to follow the policy of
watchful waiting. It made such disposition of its aviation
properties as seemed wise, and settled down to wait until
1929, when some of the "unknowns" had been eliminated
by time from the aviation problem.
This conservative approach reflected the changed atti-
tude which the Corporation adopted in other respects a
little later. The public hopefully awaited a strong lead
in aviation; and from many sources came pressing oppor-
tunities for General Motors to assume that leadership. But
the cool heads in control understood that aviation was in
for a long pull, during which investors seeking quick profits
probably would be disappointed. While the standing of
General Motors would have brought strong public support
in the financing of a vigorous aviation program, it was be-
lieved that stockholders, early following General Motors
The War Years 173
lead, would take losses because they would not be disposed
to wait for long-range plans to mature. Consequently the
Corporation refused all offers to enter airplane production
under those circumstances, but its interest in aviation con-
tinued and later revived, under circumstances and with re-
sults to be related in Chapter xxni: "General Motors in
Aviation."
General Motors decided to complete the United Motors
consolidation by using a certain number of 6 percent Deben-
tures in place of Preferred stock, and on November 7,
1918, appropriate action was taken. On December loth, the
certificate of incorporation was amended to increase the
authorized capital to $370,000,000 consisting of 200,000
shares of Preferred, 1,500,000 shares of Debenture, and
2,000,000 shares of Common, all par $100, to provide cap-
ital for the expansion swing which had been determined
upon with the renewal of peace. Du Pont American Indus-
tries subscribed for $24,000,000 of the $100 par value
Common stock of General Motors at $120 per share as of
December iQth, which was approved on the last day of
1918 with the reservation that all Common stockholders
could subscribe to the new stock at $118 a share up to 20
percent of their holdings. At these two meetings three other
important moves were made :
1. General Motors bought the minority interest in
three affiliated Canadian companies — McLaughlin
Carriage Company, Ltd., Chevrolet Motor Com-
pany of Canada, and the balance of the Mc-
Laughlin Motor Car Company, Ltd. — for 49,000
shares of its Common stock, thereby creating the
foundation for General Motors of Canada, Ltd.,
whose Oshawa and other plants are among the in-
dustrial prides of the Great Dominion.
2. The purchase of Lancaster Steel Products at Lan-
caster, Pa., was approved, on the basis of 500 Pre-
ferred shares and 3,555 Common shares and
15,660 General Motors Debentures held by Lan-
caster for 16,175 shares of General Motors Com-
mon and 5,000 shares of Debenture stock.
174
The Turning Wheel
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The War Years 175
3. The purchase of United Motors, instituted earlier
in the year, was approved on December 31, at a
price of $45,000,000, for which purpose 99,564
shares of Common stock and 298,692 shares of
Debenture stock were authorized. General Motors
already owned 106,000 shares of United Motors,
which stock was cancelled.
In 1918 General Motors, from both war orders and
advancing prices on motor-cars, recorded the high net sales
to date — $269,796,829 — but its margin of profit had been
low and only $1,667,753 was left for reinvestment after
paying dividends which had been established at the rate of
$3 a quarter on the $100 par Common stock in the preced-
ing year. Bonus awards for conspicuous services in 1918
were the equivalent of 490,238 shares of the present $10
par value Common stock.1
In the year of America's sustained war effort, 1918, the
Corporation, due to government reduction of the business,
barely earned its established dividend, but its contribution
to employees remained high. Although resentment against
profiteering was in the air, the record left General Motors
free of criticism in that regard. As an essentially peace-time
business, General Motors from top to bottom was glad to
get back to work on its big job of making motor cars for a
world no longer torn by war.
lSee Chap. XXVIII on "Cooperative Plans," for a full account of the
Bonus and Investment Funds.
Chapter XIII
THE EXPANDING CORPORATION
G,
IENERAL MOTORS swung into the post-war boom of
1919 with a spirit which matched the boldness of the coun-
try's mood. Peace found the nation jubilant, united, and con-
fident in its strength. New high wage levels had been
reached, and it was hardly possible for a nation so cir-
cumstanced to believe that they would recede. Prices were
high, also, but it was thought that the need of Europe for
supplies would keep them up for some time to come. The
automobile industry, in general, concluded that it must
make up for time lost during the war interruption in pro-
duction. Consequently, the year 1919 records an amazing
expansion program for the Corporation in the course of
which the authorized capital stock was increased from
$370,000,000 to $1,020,000,000, represented by 5,000,000
shares of Common stock of $100 par value, 5,000,000
shares of 6 percent Debenture stock and 200,000 shares of
6 percent Preferred stock. General Motors became a
billion-dollar corporation on paper, but less than a third of
its Common stock was issued.
General Motors of Canada, Ltd., had been organized
November 8, 1918, and before the end of the year its
authorized capital was increased to $10,000,000. This
strong Canadian company, located at Oshawa, Ontario,
succeeded several Canadian companies theretofore repre-
senting various units of General Motors in the Dominion,
as will be more fully explained in Chapter xvil.
176
The Expanding Corporation 177
General Motors Acceptance Corporation was incor-
porated under the banking law of New York on January
29, 1919, to finance instalment sales of General Motors
products "through the proper application of the credit
function." Twenty thousand shares of GMAC stock were
purchased by the parent corporation at $125, enabling the
new subsidiary to begin operations with a capital of
$2,000,000 and a surplus of $500,000. The rise of GMAC
is fully narrated in Chapter xxvn : "Financing and Insuring
the Buyer."
At the meeting of February 2yth, steps were taken to
complete General Motors ownership of New Departure
Manufacturing Company of Bristol, Connecticut, and Har-
rison Radiator Corporation of Lockport, New York, two
companies which had come into the General Motors circle
through the purchase of United Motors.
Two new accumulations were made, both of which bulk
large in Corporation history, though for different reasons.
In 1918-19 the Corporation bought into the tractor busi-
ness, among its purchases being the Janesville Machine
Company at Janesville, Wisconsin, and 122 acres of land
on which a new plant was to be erected ready for operation
in July, 1919. The Corporation's farm implement busi-
ness is reported as 3,000 tractors and 56,400 farm imple-
ments in Poor's Manual for 1919, which also reports the
Corporation holdings in Samson Sieve-Grip Tractor Com-
pany of Stockton, California, as $400,000 and in the
Janesville Machine Company, Janesville, Wisconsin, as
$1,000,000, both representing complete ownership of all
Common stock issued by both companies. Later the Cor-
poration's holdings in the Janesville Machine Company
rose to $2,250,000, where it stood when that company was
dissolved and its operations consolidated with the Samson
Tractor division. The latter soon took over all the assets
of the Samson Sieve-Grip Tractor Company. This mush-
room expansion in the direction of motorized agriculture
brought heavy losses.
In February also was begun the most significant enter-
prise the Corporation had as yet undertaken in the field of
social research. A new spirit of brotherhood was abroad in
178 The Turning Wheel
the land, and General Motors was one of the first to re-
spond to it. Owing to the uncertainties attendant upon the
change from war activities to peace-time pursuits, the Cor-
poration considered it necessary to have the basic needs and
living standards of its employees studied, to the end that
wage rates would be fair and living conditions acceptable
to thousands of families likely to move into cities where
General Motors was rapidly expanding its operations.
Accordingly, the Executive Committee, consisting of
Messrs. Durant, Haskell, and Chrysler, was directed to in-
vestigate industrial conditions affecting the plants of the
Corporation. These gentlemen promptly appointed a
research committee, which met in Detroit on February I7th
and proceeded at once with an extensive study of the labor
situation, living conditions and other industrial problems
of General Motors plants. An imposing body of data was
collected on bonus plans, group insurance, employees' com-
mittees, pension plans, etc. The findings of this Research
Committee launched the Corporation upon a large-scale
housing program in Detroit, Flint, Pontiac, and Lansing,
Michigan; Bristol, Connecticut; and elsewhere, and also
led it into other activities aimed at promoting the well-
being and contentment of employees.
This elaborate report, one of the most comprehensive
social studies ever made by an American corporation, is a
testimonial to the energetic altruism of the chairman of the
Research Committee, Mr. J. Amory Haskell, in whose
kindly and judicial mind the well-being of employees ever
was a first consideration. Mr. Haskell, after a long and
impressive career in the explosives industry in competition
with the du Fonts, had brought his company into the
du Pont organization, and entered General Motors as one
of the du Pont directors. A conservative man, yet with
broad humanitarian interests, he was a force in General
Motors affairs until his death in 1923.
This disposition to consider employee interests had an-
other significant development in the founding of General
Motors Institute of Technology at Flint, described in
Chapter xxvin, on ''Cooperative Plans."
The Expanding Corporation 179
In March, 1919, General Motors bought additional
stock in the Frigidaire Corporation for $56,366.50. Frigi-
daire, originally Guardian Frigerator Corporation, was
bought by Mr. Durant in 1916 and is another example of
his power to read the future. The rise of Frigidaire to first
place in the quantity production of electric refrigerators
will be told elsewhere.
Occurred then, also, the Corporation's entry into
Muncie, Indiana, where it bought the Interstate Motor
Company for $248,000 and paid $40,000 for additional
land. For a brief period, the Sheridan car was made there.
The property is now the seat of production for Delco-Remy
batteries.
On April 24, 1919, the Corporation began extensive real
estate and construction projects destined to have an im-
portant effect upon its history, since they diverted many
millions of dollars from the treasury and were still un-
completed when the prosperity of the post-war boom
waned. The most ambitious of these was the construction
of the mammoth office building at Detroit, planned as the
largest structure of its kind ever built. Covering the entire
block bounded by Grand Boulevard, Cass and Second
avenues and Milwaukee Street, it is now the central office
of the Corporation. The Durant Building Corporation hav-
ing been formed, General Motors authorized subscription
to $3,000,000 of its stock on April 24th. Before it was
completed, this building cost approximately $20,000,000.
From April to July the Corporation created various com-
panies for housing construction, the authorized capital in
each company being as follows, although considerably more
money was spent for this purpose :
$500,000 in the Bristol Realty Company, Bristol, Con-
necticut, for the accommodation of New Departure
employees.
$3,500,000 in the Modern Housing Corporation, to
build houses in Flint, Pontiac and Detroit.
$200,000 in the Lansing Home Building Company.
$200,000 in the House Financing Company of Detroit.
General Motors Building, Detroit
180
The Expanding Corporation 181
On June I2th, the stockholders ratified the increase in
authorized stock to $1,020,000,000, the details of which
have already been given at the beginning of this chapter.
From August on, the Corporation expanded rapidly. The
directors authorized the purchase of the International
Arms & Fuse Company plant at Bloomfield, New Jersey, for
$1,175,000 and of T. W. Warner & Company, gear makers
of Muncie, Indiana, for $5,000,000. Both deals were de-
layed in maturing. The Muncie property not being then
obtainable, the Corporation took a lease as of September
25, 1919, with the option to purchase after January i,
1923, for $902,000 in Liberty Bonds and 31,238 shares
of Debenture stock. This property became the Muncie
Products division.
Various steps in the expansion program were:
The purchase of the Pontiac Body Company and its ad-
dition to Oakland.
The purchase of Domestic Engineering Company of Day-
ton, Ohio, for 35,451 shares of Common stock, given
in exchange for 33,070 shares of Domestic Engineer-
ing Company stock valued at $9,000,000.
A merger was effected with Dayton Metal Products Com-
pany, whereby General Motors acquired all the out-
standing shares of Metal Products (60,000 shares) in
return for 25,338 shares of Debenture stock and
21,457 shares of Common stock in the Corporation.
The Dayton-Wright Airplane Company, with assets in
excess of $1,200,000, was bought for 10,960 shares of
Debenture stock.
Through reorganizations and transfers all of these Day-
ton companies have passed from the picture, and their
plants are now used for other Corporation products.
Of outstanding importance in the Corporation's history,
also, is the decision taken on September 25th to buy a
three fifths interest in the Fisher Body Corporation, which
was effected by the purchase of 300,000 shares of Fisher
Body Common stock at $92 a share. The purchase con-
tract, among many other provisions safeguarding the Fisher
182 The Turning Wheel
interests, required these shares to be deposited in a voting
trust. The importance of this alliance, which was later ex-
tended to the point of complete merger, can hardly be over-
estimated.1 It gave General Motors first call on the pro-
duction of the largest and best equipped body-building
plants in the world. With the steady trend toward closed
cars, the Fisher brothers, experienced from youth in the
FRED J. FISHER
One of the founders of Fisher Body
difficult arts of body design and construction, had pushed
forward until they occupied a foremost position in their
line both as to quantity and quality. The Fisher name had
become known far and wide, and the presence of a Fisher
body on any car recommended it to the consuming public.
By this one decisive step the General Motors Corporation
wrote off future body difficulties by placing that business in
the hands of outstanding specialists in the field of body
manufacture. With advancing complexities in design and
manufacture, the wisdom of this alliance has become in-
creasingly manifest.
This date, September 25, 1919, registers the high-water
mark of optimism during the Durant presidency. The Cor-
poration had expanded its capital, brought under control
many sources of supply, and on that date authorized the
*See Chap. XX: "Body by Fisher: The Motor-Car as a Style Vehicle."
The Expanding Corporation 183
investment of up to $500,000 in the Common stock of
Goodyear Tire & Rubber Company of Akron, which hold-
ing was sold soon afterward.
If General Motors is considered merely a manufacturer
and seller of automobiles, the expansion from 1916 to 1920
contains a good many inexplicable elements; but the key to
this period can be found in the word "motors." As will be
shown in Chapter xv, this is the key to later diversification
of the Corporation's products, especially in the direction
of household, office, store, and farm equipment. The Cor-
poration was no longer interested merely in motors that
traveled and in the vehicles they propelled. Its scope had
been enlarged to include motors designed for a wide variety
of specialized and stationary uses, and in the commodities
which housed motors — in motorized refrigerators, motor-
ized farm-lighting plants, motorized fans, and other equip-
ment. The variety of its merchandise would grow from this
time on, but always the growth would be in the direction
of motor products. Expansion in the passenger car field
stopped with the acquisition of Scripps-Booth which the
directors were ready to cut adrift in 1919, and the short-
lived experience with Sheridan in 1920-21. There would
be further expansion in commercial vehicles, but in general
the trend of General Motors' growth in the post-war
prosperity was toward rounding out an established property
and pushing it toward an ever-improved market position
with the consuming public.
During the 1919 boom, with the market emphasis on
quantity, General Motors reached its highest earnings to
date, more than $60,000,000 net available for dividends,
paid nearly $22,000,000 in dividends, and allocated more
than $38,000,000 to reinvestment in the business, after
setting aside some $30,000,000 for Federal taxes and mis-
cellaneous items. But even that sum could not finance the
driving expansion program under way. This prosperity was
shared with employees through bonus awards in which were
distributed the equivalent of 402,485 shares of present $10
par stock and 14,191 shares of 7 percent Preferred stock.
The number of employees had taken another upward leap,
reaching nearly 86,000, more than four times as many as the
184 The Turning Wheel
Corporation had in 1913. One influence of the World War
on America may be read in these contrasting employment
figures for 1913 and 1919. The period included two booms
in which well managed industrial companies expanded
staffs, drawing population from the land to the cities and
concentrating employment as it had never been concen-
trated before in the United States.
The Corporation signalized the advent of 1920 — a year
destined to end quite otherwise than it began — by increas-
ing its authorized capitalization again, this time to 56,100,-
ooo shares divided as follows :
200,000 shares of 6 percent Preferred, par $100
900,000 shares of 6 percent Debenture, par $100
5,000,000 shares of 7 percent Debenture stock, par $100
50,000,000 shares of Common stock, no par value, of
which upwards of 20,000,000 were issued.
The senior securities issued stood in 1920 at slightly
above $100,000,000.
To these gigantic proportions W. C. Durant had seen
his brain-child grow from the original Buick Motor Com-
pany of $75,000. Conservative men began to wonder where
this victorious march would end, and amazement gave way
to some concern when falling grain prices in the spring of
1920 foreshadowed the post-war decline.
During the first three months of the year General Motors
went along with its program of internal consolidations.
Minority interests in Chevrolet of California were bought
and steps were taken to complete ownership of Klaxon
horn. Two companies were dissolved — Samson Sieve-Grip
Tractor and the Michigan Crankshaft Company.
The former name, Samson, is still one to rouse lurid
reminiscences among the old-timers in the General Motors
family. Under the Samson banner the Corporation entered
the farm tractor field, expanding for that purpose the
Janesville, Wisconsin, plant, later taken over by Chevrolet.
In the full flush of his enthusiasm for motorized farm
transport, Mr. Durant had not only spent lavishly on the
Samson tractor; he had also tried to tame the Iron Horse,
The Expanding Corporation 185
a small tractor for garden use, ordering large quantities
of material for its manufacture. Always alert to new notes
in sales campaigns, he undertook to revolutionize imple-
ment selling by organizing elaborate displays in specially
designed show places on the Pacific Coast. These displays
were beautiful examples of advanced merchandising, but
events showed them to be ahead of their time. Indeed, the
whole program of farm motorization so popular then was
too advanced, being founded upon the assumption that the
world could use practically unlimited quantities of food-
stuffs at high prices. The slump in farm prices which set
in with the post-war depression was to continue for years,
reducing operations by nearly all manufacturers in that field.
By June, train-loads of motor cars standing undelivered
in Western terminals gave a hint of what was coming. Live
stock and grain prices were unsettled, and unemployment
began to show itself. By late summer the decline reached a
point at which General Motors could hardly look for earn-
ings to flow in rapidly enough to meet the charges of its
uncompleted expansion program. The pendulum which had
been rising with but slight interruption since 1915 began
a downward swing.
In a retrospective vein President Alfred P. Sloan, Jr., ad-
dressing the automobile editors of American newspapers at
the Proving Ground at Milford, Michigan in 1927, graphi-
cally reviewed the 1920 situation as he saw it:
In the spring of 1920, General Motors found itself, as it appeared
at the moment, in a good position. On account of the limitation
of automotive production during the war there was a great
shortage of cars. Every car that could be produced was produced
— and could be sold at almost any price. So far as any one could
see, there was no reason why that prosperity should not continue
for a time at least. I liken our position then to a big ship in the
ocean. We were sailing along at full speed, the sun was shining, and
there was no cloud in the sky that would indicate an approaching
storm. Many of you have, of course, crossed the ocean and you
can visualize just that sort of a picture — yet what happened? In
September of that year, almost over night, values commenced to
fall. The liquidation from the inflated prices resulting from the
war had set in. Practically all schedules or a large part of them
186 The Turning Wheel
were cancelled. Inventory commenced to roll in, and, before it
was realized what was happening, this great ship of ours was in
the midst of a terrific storm. As a matter of fact, before control
could be obtained General Motors found itself in a position of
having to go to its bankers for loans aggregating $80,000,000 and
although, as we look at things from today's standpoint, that isn't
such a very large amount of money, yet when you must have
$80,000,000 and haven't got it, it becomes an enormous sum of
money, and if we had not had the confidence and support of the
strongest banking interests our ship could never have weathered
the storm.
On this occasion General Motors had strong banking
connections. An agreement was entered into for the distri-
bution of 3,200,000 shares of Common stock at $20 a
share. Explosives Trades, Ltd., of London was interested
by the du Fonts to the extent of 1,800,000 shares, the bal-
ance being underwritten by J. P. Morgan & Company.
The Explosives Trades passed a part of its allotment in
this undertaking to Canadian Explosives, Ltd., a subsidiary,
but before their subscription had been taken up, the Ameri-
can stock market showed such signs of weakness that doubt
arose whether the Canadians would purchase at the figure.
On top of the general situation, General Motors had weak-
nesses of its own, the net results of heavy commitments and
slackening sales. These were complicated for the Corpora-
tion by the recurrence of the malady already noticed as
present in 1910, namely, uncertainty over inventories. Esti-
mates furnished the Finance Committee were approximate
rather than definite, and even the approximations did not
hold as the returns began to roll in from the wide-flung field
operations. Again, it was apparent that centralized authority
had not advanced to the point of giving the central office
full information on plant commitments ; there was still
opportunity for plant executives to act independently enough
to embarrass the Corporation. The initiative of plant man-
agers, which the Corporation had always sought to pre-
serve, and which had worked magnificently on the up-swing,
brought complications on the down-swing. Discrepancies
between estimates and actualities, in the matter of inventory
commitments, ran into scores of millions. It began to look
The Expanding Corporation 187
as if General Motors were in for another "squeeze, " for
another experience under banker control.
With the stock declining on the Exchange, a serious situa-
tion developed for Mr. Durant. His personal operations
in the stock market had been large in volume. It was a
common saying that he never sold General Motors but al-
ways bought it. On the 1920 decline he kept buying until
his "Street loans" reached a critical condition. The explana-
tion given by his friends for the more acute phase of his
trouble is that he endeavored, by extending his buying on
the decline, to maintain a price above $20 in order that
Canadian Explosives would come in at that figure and take
the 300,000 shares allotted to them. His battle with the
falling market, however, reached proportions far in excess
of the $6,000,000 involved in that particular transaction.
When his situation became known to his colleagues, it was
found that his commitments to bankers and brokers ran to
several times that figure. His operations had been so huge
and hurried that not even Mr. Durant himself could be quite
sure what he owed. With each conference the sum kept
growing, until it is said to have approached $35,000,000.
On a falling market, with public confidence low and Gen-
eral Motors in a position of rising inventories and decreas-
ing earnings, the difficulties of its president became the
difficulties of the Corporation. If Mr. Durant were to be
sold out by his bankers and brokers, a possibility which be-
came more and more imminent with every point decline, in-
volving $2,450,000 loss to him, the forced sale of his
pledged securities on a falling market would have meant a
wild decline in the whole stock list, perhaps even a panic,
and a severe blow to General Motors' credit. On March i,
1920, a ten-for-one stock split-up had been effected, and the
new no par stock had already lost more than half its
market value. The high and low figures for 1920 show the
market nervousness — high 42, low I2J4.
From the standpoint of both the general welfare and
the corporate credit, it was necessary for someone to finance
a settlement with Mr. Durant's brokers and take his stocks
out of the market. In the General Motors picture only the
du Fonts had the financial strength to do this. Even with
188 The Turning Wheel
their resources and the strong incentives of their existing
stock ownership, their "rescue" was an adventure of faith,
when the general condition of the market and the country
are considered. The transaction received the active aid of
J. P. Morgan & Company and could hardly have been con-
summated without the assistance of that banking house.
While general recovery was slow, it was steady from that
point on until returning confidence ushered in the prosper-
ity of the mid-'twenties.
The Durant stocks in jeopardy were taken over at a price
which cleared his slate and left him a not inconsiderable
margin. His friends might rate his fortune at this stage as
far less than his deserts, considering his services and record
through General Motors history, but on the other hand,
the fact that something was saved for him when all might
have been lost indicates that there was every disposition to
deal fairly with him as far as the needs of a desperate
situation would permit. He resigned the presidency on
November 30, 1920, after four and a half years in office
— years of great achievement and bold expansion pushed
at a pace so rapid that it brought difficulties.
There is a jaunty nonchalance, a cool courage, in the
Durant character which on more than one occasion has let
him rise from defeat. It showed itself in 1910 when he
turned from General Motors to found Chevrolet and
through Chevrolet to recover control of General Motors.
Indeed, if one were attempting a psychological interpreta-
tion of so complex a nature, one might say that Mr. Durant
never recognizes defeat. What might be considered by
others an irretrievable misfortune, to be weighed in sorrow,
is to him but a turn of the wheel on which he expects to swing
round to the top again. So we see the founder of General
Motors leaving its councils for the second and last time
apparently without either remorse or wrath, and saying, as
he put on his hat with something of a flourish, "Well, it's
moving day."
The story runs that immediately after his eclipse Mr.
Durant called together his "crowd," those who had fol-
lowed him into General Motors and out of it and back
again. He told them that the powers left in control of the
The Expanding Corporation 189
Corporation were "good people/' and that if the old crowd
wanted to help "Billy" Durant, they should stay with the
Corporation as long as they were wanted and serve loyally,
because what he had left was in General Motors stock and,
consequently, he would benefit as the Corporation bene-
fited. A few days later one of his friends went to see him
at a small office he had opened near by, to say that he had
been asked by the du Fonts to carry on. Mr. Durant ad-
vised him to do so. Then, going to the window, Mr. Durant
raised the shade full length, and said with his head high,
"It's a new day!" No better last line could be written for
the end of a drama.
As the founder of General Motors leaves its history, it
is pertinent to review his achievements briefly, not with the
idea of passing judgment in either a laudatory or captious
spirit, but rather to give point to lessons which the great
army of General Motors employees and the public likewise
may draw from his career in the Corporation.
First, from 1904 to 1908, W. C. Durant "made" Buick.
Given a staunch car he had improved it steadily by a rigid
insistence on quality. Although Buick was moderately
priced, its chief insisted on good workmanship and high-
priced materials. Although no operating man, in the sense
in which the term is used today, he had high standards of
what manufacturing should be. If he heard that Amesbury
was furnishing expensive fittings for Packard, off he would
go to Amesbury to buy equally good fittings for Buick, re-
lying on quantity purchasing power to bring the price down
to reasonable levels. But all in all he was a better salesman
than manufacturer. With Buick, Mr. Durant proved, as he
had proved in the carriage industry, that he was a master
salesman, building up a sales organization which was the
marvel of its day, and copied by competitors as far as they
could do so. Many units of this early Buick sales organiza-
tion are still dominant in the distribution of motor cars
over wide areas.
In founding and financing General Motors through its
first expansion period without first-class banking help, W. C.
Durant demonstrated his skill as a promoter. He has been
called America's greatest living promoter, and no exception
190 The Turning Wheel
has ever been taken to that. It is hardly too much to say
that this quiet, soft-spoken man is the greatest promoter
America has ever seen in action. General Motors is today
the largest American corporation whose founding was the
result of the promoting ability of a single individual, and as
the trend is toward group rather than individual enter-
prises, his achievement in creating General Motors may
never be equalled in any other field. Add to that record
Chevrolet and United Motors, now merged into General
Motors but brought into being separately, and you have a
three-way success which is simply colossal. Of course, vari-
ous elements in this energetic program proved to be disap-
pointments, but enough survived to carry the whole through
to a stupendous success. Napoleon remains a great soldier
in the opinion of the world in spite of Waterloo. Both
promoters and conquerors sometimes overstay markets.
One can call Mr. Durant a promoter without implying a
derogatory note. There are times and situations in which
the promoter is the indispensable man, the almost inspired
servant of society. He may be moved chiefly by the desire
for power and profits, and comprehend scarcely at all the
social results of his activities; nevertheless, without his zeal
in bringing labor and capital together along the line of his
vision the world would have to wait longer than necessary
for many boons. Of course, no one could foresee the full
impact of motors on American life, but W. C. Durant did
recognize some of the important futurities, and reacted
toward them promptly. His early championship of good
roads is a case in point, his keen acceptance of electric re-
frigeration is another, and a third was his instant recogni-
tion that this new industry could not afford to pay low
wages, because the buying power of the masses must be kept
active to absorb automobiles in quantity. On the personal
side, he gave largely, paid generously for loyal or signifi-
cant services, followed a liberal policy toward shareholders
and in so far as he could, made sure that his friends and
associates prospered along with himself.
The tap-root of the Durant nature appears to have been
an incurable optimism which was the source of both his
driving strength and his besetting weakness. He always
The Expanding Corporation 191
hoped for the best, and never prepared for the worst in
time to ward it off. In his long business career — he said
recently that he had been in business fifty-five years — he
wrestled many times with the business cycle without appar-
ently becoming convinced of its periodicity. He could sell
company stock, but he could never sell his personal hold-
ings. Because Mr. Durant performed financing feats, and
handled huge sums of money, the notion grew that he
was a financier. Thus we find him hailed as one of "the
Master Minds of Finance" in a Wall Street series during
the flush period. The truth is that he was no financier in
the sense that the term implies caution and conservatism.
He could act boldly and daringly with money, and when
circumstances favored the finance of courage he seemed a
financier. But money is a two-edged sword, and when cir-
cumstances demanded the finance of caution Mr. Durant
was lost.
Studied defences of Mr. Durant's responsibility for the
vast expansion program of 1919 have been printed. From
these it would appear that he declines to take full responsi-
bility for some of the moves which brought the Corporation
treasury low when the pinch in sales came. It is said that
his plans for the office building in Detroit, and the con-
current expansion at Cadillac, were considerably more
modest than the expensive projects put under way; that
he yielded to the pressure of his associates. In the history
of an industrial enterprise motives are more difficult to
follow than results of record; a word, an opinion, some-
times even a gesture, may tip the scales this way or that. In
this case all concerned were working at top speed, and it
was inevitable that minds did not always meet when their
possessors thought that understanding was complete.
There is an old saying that every man has three chances
at riches in the course of the average business career. To
put it another way, there are usually three complete swings
of the business cycle in each quarter-century. It is human
nature to "go broke" in the first depression one experi-
ences, rally and survive the second by a narrow squeak, and
then, having learned the lesson of experience, prepare for
the third and emerge from it in full strength. As for men,
192 The Turning Wheel
so also for corporations. The special circumstances sur-
rounding the automobile industry in 1907 kept Buick from
feeling that shock severely, but a crisis came to General
Motors in 1910. Ten years later came another; it found the
Corporation better prepared to weather a storm though by
no means as fully prepared as it would be ten years later.
With Mr. Durant's retirement, Pierre S. du Pont be-
came president, continuing as chairman of the board. The
new burden was one which Mr. du Pont did not seek; in-
deed, it was thrust upon him by the dire needs of the situa-
tion in which the Corporation found itself. In its 1910
trouble the bankers who rescued General Motors insisted
on all possible legal protection as embodied in mortgage
and voting trust. Although the 1920 situation of the Cor-
poration was not as serious as its predecessor, nevertheless
a receivership might have been asked for except for the high
degree of confidence in which the new management was held
by the banking fraternity. Mr. du Pont began his presi-
dency by telling his associates that the Corporation was
now operating under the most delicate and honorable re-
lationship known to industry, "a receivership of our own,"
and in this spirit the Corporation carried on.
The totals for 1920 were relatively high because of the
excellent earnings of the early months of the year, so the
full force of the blow would not be of record until 1921.
In 1920 General Motors earned $22,000,000 less than in
1919, and after dividends could reinvest only $14,000,000.
The worst was still to come from the accounting stand-
point, but by the close of 1920 the situation had been faced
and the restoratives applied.
Chapter XIV
THE NEW ERA UNDER PRESIDENT
DU PONT
ITH the presidency of Mr. du Pont, General Motors
history entered a new phase. A calm, solid man, accustomed
from youth to large affairs, and with the family habit of
taking broad, far-reaching views, he brought to his new
responsibility a poise the Corporation had never quite
known before. He had a keen sense of fiduciary responsi-
bility, and yet he was perfectly aware, as many conservative
men are not, that by no means all the values of an organiza-
tion can be listed on a balance sheet and appraised in dollars
and cents. General Motors had had one experience of that
sort, from 1910 to 1915, and it had ended abruptly with
the Durant recapture through Chevrolet, as previously de-
scribed, precisely because Mr. Durant knew the hidden
values better than the bankers did.
On the other hand, Mr. du Pont was never driven by the
devils of haste and expediency. The bright face of danger
had no allurement for him. His attitude toward the vast
property committed to his care was that of a conservator
rather than a promoter. His faith in the future of General
Motors and of the automobile industry in general held as
firmly as that of his former associate, but he saw clearly that
his job lay in reorganization, not expansion. General Motors
was now a "made" property, and as such in need of long
views and continuing policies. True, it had been made by
desperate daring as well as by steady toil, but in 1920 it
needed balance rather than daring. The emergency problem
193
194 The Turning Wheel
was to save the structure intact, certain that the swing of
business would restore buying, and that General Motors
would come up with the country if the weaknesses recently
revealed were courageously met.
Mr. du Font's personality was not long in making itself
felt. At the beginning he faced a difficult problem in re-
establishing employee morale shaken by the sudden change
of management. Remember that General Motors was a
Middle Western creation. Important posts were filled by
men who looked upon Mr. du Font's predecessor with
adoration. Many of them had followed him into Chevrolet
and back into General Motors. Now they were disposed to
stick with the Corporation, realizing that General Motors
was here to stay and that their futures were at stake.
Nevertheless, accustomed as they were to the Durant pro-
cedure, they anticipated difficulties for themselves under
du Pont management. Changes in personnel were necessary
in many cases; and events indicated a need for a wholesale
realignment of relations between the plants and the central
offices. Whether that could be done seemed for a time doubt-
ful; the situation was so tense, for instance, that in the case
of one new manager there was grave doubt whether he
might be allowed access to his office without interference
from men who were being replaced.
This nervousness applied not only to managers but to
labor staffs as well, and through them spread to whole com-
munities. In no small degree the high morale of General
Motors labor had been due to the dramatic leadership of
the former president. To his old employees Mr. Durant
had been both boss and friend, and while thousands of the
later comers in his labor ranks had never seen him in the
flesh, they knew him by hearsay. Years ago he had taken on
for them the attributes of myth and story. He was their
hero, their superman, doing the things they would like to
do if they could. Particularly they had rejoiced when, like
a Lochinvar out of the West, he had stolen the General
Motors bride from the Eastern bankers in 1915. Now they
began to grumble about absentee ownership and Eastern
control, and wonder whether their jobs and houses would be
worth anything a year hence. Even the substantial business
PIERRE S. DU PONT
President, General Motors Corporation, 1920—23
196 The Turning Wheel
men of the Michigan cities with General Motors plants
grew panicky at the thought of what might happen to them
and their investments if, under the aegis of the du Fonts,
plants were to be moved from West to East. Absurd rumors
to that effect gathered headway; Chambers of Commerce
grew excited and wrote in to plead consideration for their
communities in the pending changes.
As soon as bandages had been applied to the sorest of
the many sore spots on the corporate body, President du
Pont took a statesmanlike swing around the General Motors
circle. He visited plants and talked to groups of employees
and associations of citizens. Everywhere he went he had
the benefit of what the diplomats call a "good press." Local
interests, from banks down to laborers, were reassured
when they beheld this kindly, steady man and heard him
tell them to be of good cheer. General Motors, he said,
would stand by its investments in their communities as long
as those communities stood by General Motors. There
would be changes, of course, since not to change at the
challenge of events was to risk corporate dry-rot, but the
changes would benefit rather than injure the workers and
the communities sustained by General Motors pay rolls.
Opinion in Michigan completely reversed itself as soon as it
heard that message : real estate values began to regain their
buoyancy; labor, its morale; and plant executives, their
stamina.
As on two previous occasions in the Corporation's history
there were unfortunate accumulations to sweep away while
reorganization efforts went forward. Liquidation of the ex-
pensive Janesville tractor experiment began. The Doyles-
town Agricultural Company, bought as part of the farm
motorization program, went for $48,500, a loss of almost
$100,000. The unfortunate Heany venture was finally wiped
off the Corporation books when $1,205,000 in cash and
securities was received from General Electric in return for
General Motors interests in the electric light business.
An action most reassuring to the city of Flint was a Gen-
eral Motors subscription to $300,000 worth of capital
stock in the Durant Hotel erected there and named for the
founder of the Corporation.
New Era Under President du Pont 197
Meantime, the Corporation undertook a comprehensive
study of its inter-relationships. As we have seen, General
Motors' early growth was swift and chaotic. In that stage
it was a hybrid rather than a unified organization. Attempts
to organize it had been partially successful, but never wholly
so, and for obvious reasons. Here was an enormous
ganglion of highly active units, each of which faced prob-
lems peculiar to itself, each of which made its own approach
to the public in the market place, and each of which had
its own distinctive pride. Too much concentration of
authority might very well reduce the initiative of plant man-
agers and the efficiency of their staffs. On the other hand,
since many of these units were dealing with one another,
were buying similar goods and services, and all of them in
the last analysis were taking their goods to the same market,
the intelligent cooperation of the units was desirable up to
the point of diminishing returns. Where to locate that point
could be determined only by experiment, and preferably by
cautious rather than rash experiment. Consequently various
inter-divisional bodies were set up to integrate policies with
respect to products, sales, purchasing, advertising, etc., thus
initiating a program of close coordination but preserving
decentralized administration.
One of the practical reforms of this period deserves
especial attention since the danger which it corrected had
twice played a destructive role by bringing General Motors
into financial straits. This was a reasonable control of in-
ventories. During the boom days when supplies were rel-
atively scarce, plant managers had fallen into the habit of
ordering in excess of need, sometimes to double or triple
their requirements, merely to be assured that they would
receive enough to let them fill their production programs.
This had its obvious result. When business slackened, sup-
plies were pushed out and sent forward faster than they
could be used, and cancellations were not always applied
in time to check the flow. Sometimes these cancellations
did not hold, particularly if the order had been started on
its production process. The new management met this by
limiting the independent buying power of plant managers
198 The Turning Wheel
to the requirements of a four months' forecast. Control of
inventory was the great lesson learned from the troubles of
1920-21.
Another weakness, in effect the other side of the inventory
shield, was the lack of information regarding retail sales
and stocks of cars in dealers' hands. None of the Corpora-
tion's automobile producers knew with even approximate
accuracy how fast their cars were being taken out of the
market by consumers; consequently they had no yardstick
immediately available by which to regulate production. A
first step was taken when General Motors encouraged R. L.
Polk & Company to gather and make available to the
entire industry, regular and frequent statistics of motor-car
registration as fast as the figures could be gathered.
While real control of the production cycle, based on
definite information, required some years in working out, the
thought impulses in that direction began early in the re-
organization. By 1923 each manufacturing division was
obtaining from dealers ten-day reports on sales and cars in
stock; by 1925 a degree of control over production pro-
grams had been achieved through a system suggested by
Donaldson Brown, then vice-president in charge of finance.
The essence of this improvement lies in control of produc-
tion in line with retail demand as forecast on the basis of
accurate and regular reports from the field, the final con-
trolling calculations being worked out with reference to all
calculable factors in the changing economic situation. Major
errors of calculation have since been few and usually on the
side of conservatism, so that at no time since this system
was developed has General Motors been seriously threat-
ened by unwieldy frozen inventories of either finished goods
or parts in process. The decisions in this field are arrived at
by consultations between headquarters and local managers
with accurately gathered facts, usually bringing the con-
ferees into agreement.
General Motors' outstanding contribution to industrial
organization has been made along this and similar lines.
Even a brief survey of the anatomy of industry reveals that,
in general, industry is either autocratic or feudal in its set-up.
New Era Under President du Pont 199
Mr. Durant's rule over General Motors during his in-
cumbencies may be accepted as a fair example of the second.
Mr. Durant relied on trusted lieutenants and trusted some
of them too far, their capacities sometimes being unequal
to their responsibilities. In attempting to find a steady base
somewhere between these different ways of expressing in-
dustrial authority — which, of course, is a sine qua non of
dependable production — General Motors set up a system of
liaison and control for which corollaries must be sought
elsewhere than in industry.
This system has been likened in some respects to the staff-
and-line organization of an efficient army, with the staff as
the planner and coordinator of line activities, the former
mapping the strategy of the campaign, the latter applying
the tactics most likely to carry out the strategy. But if Gen-
eral Motors' organization has certain military aspects, it
has others which are quite the reverse of military. Indeed,
to the limited extent to which central control functions, it
does so through a system of coordination seen to resemble
the activities of a government rather than that of an army,
while local managers, within the frame of consultative co-
ordination described above, retain administrative jurisdic-
tion over and responsibility for their divisions, each of
which is an operating unit. Some concessions were made to
the economic pressure of 1931-33, but these were not con-
sidered ideal relationships and were discontinued as soon
as the need for them passed. The inter-divisional set-up of
1927 is thus described by Mr. Donaldson Brown:
Serving in the direction of crystalizing the important Corporation
policies and making them effective, and to facilitate the adapta-
tion of engineering improvements and operating methods, there are
various so-called inter-divisional relations committees. They have
suitable representation from the most important divisions, and are
as follows:
General Purchasing Works Managers
General Technical General Sales
Institutional Advertising
200 The Turning Wheel
These committees meet separately once a month. The President
of General Motors is a member of each one and besides, there is at
least one other member of the Executive Committee. The work
of the committees clears through various central office staff organ-
izations, maintained so as to perfect the flow of information back
and forth and to facilitate the orderly consideration of common
problems of important policy and procedure. . . . Where there is
a question at issue on the score of Corporation policy, the Presi-
dent of General Motors makes the decision or refers it to the
Executive Committee. Cases of this kind are rare.1
The inter-divisional relations committees named above
occupied themselves only with the policies in their respec-
tive fields, which required consideration from the stand-
point of the Corporation as a whole, rather than from the
standpoint of any single division.
If one thinks of these various committees as conducting
investigations and taking the evidence of experts as Con-
gressional committees do, and within a definite range of
authority making decisions which are either put into effect
immediately or referred to some higher committee for ap-
proval, then one will have a rough idea of how General
Motors functions. An illustration, taken from the same
address, will show how a committee works on a specific
problem — that of prices :
The question of pricing product from one division to another is of
great importance. Unless a true competitive situation is preserved,
as to prices, there is no basis upon which the performance of the
divisions can be measured. No division is required absolutely to
purchase product from another division. In their interrelation they
are encouraged to deal just as they would with outsiders. The in-
dependent purchaser that is buying product from any of our divi-
sions is assured that prices to it are exactly in line with prices
charged our own car divisions. Where there are no substantial sales
outside, such as would establish a competitive basis, the buying
division determines the competitive picture, — at times partial re-
quirements are actually purchased from outside sources so as to
perfect the competitive situation.
1From Vice-President Donaldson Brown's address to the American Man-
agement Association, February, 1927.
New Era Under President du Pont 201
After the date of Mr. Brown's speech the status of inter-
divisional relations was changed. The Operations Com-
mittee was no longer inter-divisional but did all the routine
work of the Executive Committee. The roster of inter-
divisional relations committees was then reduced to four —
General Sales, General Purchasing, General Technical, and
Works Managers. Several advisory committees were
formed, as the Public Relations Committee, Advertising
Committee, and the like. Somewhat further simplification
in the direction of greater divisional autonomy occurred in
October, 1933, when W. S. Knudsen became executive vice-
president of the Corporation in charge of car and body
manufacturing in the United States and Canada.
The acute financial pressure of 1921 had stirred the Cor-
poration to another reform of lasting consequence both to
itself and to industry at large. This was the better mobiliza-
tion of its cash resources through the use of the fiscal trans-
fer machinery which had been set up by the Federal Reserve
system. In October, 1920, General Motors owed to banks
$82,700,000. The strides made by General Motors in ten
years from 1910 to 1920 can be measured by its borrowing
power. In the former year it had to mortgage all its
properties to borrow $15,000,000; in 1920 it could borrow
more than five times this sum without recourse to unusual
expedients. Yet during this stringency many of the divisions
had more money than they needed. Clearly, one reform im-
mediately necessary was the pooling of financial resources.
This was accomplished in a way which has historical inter-
est, as it was the first occasion in which the machinery of
the Federal Reserve system was used to facilitate the fund-
transfers of a large corporation active over the whole
United States, and the plan so set going has been studied
and adopted in principle by many other corporations.
There were two elements in the problem. One was the
rigidity of General Motors cash under divisional control,
which forced Corporation borrowing when division funds
were tied up by managers most concerned with being on
the safe side in their own operations; the other was the
time involved in transferring funds from city to city and
from plant to plant, involving a "float" of ten million
202 The Turning Wheel
dollars at a time when every dollar could be used to ad-
vantage. Furthermore, the Federal Reserve system, hav-
ing established means of practically instantaneous transfer
by telegraph, desired to have those facilities tested in use.
Three plans were submitted by General Motors to the
Federal Reserve officers, one of which was accepted as work-
able. It involved the automatic transfer of General Motors
balances from its banks of deposit whenever the maximum
agreed deposit to be retained by that bank had been ex-
ceeded. These remittances accumulated in eleven large banks
as central reservoirs. In place of slow remittances by mail,
telegraphic transfers shifted funds almost instantly.
This change involved visits to banks all over the country
and many consultations with division executives to convert
them to the idea of central financial control. As a means of
meeting their natural concern to have abundant working
capital promptly when needed, a system of disbursing funds
to divisions upon requisitions was set up which operated as
swiftly as the inflow.
As the plan became effective over the entire country,
with all divisions and their banks cooperating through the
Federal Reserve system, it was seen to have decisive bene-
fits for all concerned. The Corporation benefited by reducing
its "float" from $10,000,000 to $4,000,000, and also by in-
creasing its potential borrowing power from $82,700,000
to more than $100,000,000. The banks cooperating in the
plan benefited by having more stable General Motors de-
posits, and by having the interest rate on those deposits
uniform for the entire country for several years after the
plan went into effect. They were able to use General
Motors deposits to better advantage than formerly. The
Federal Reserve system benefited by demonstrating to the
industrial world the efficiency of its service, the demonstra-
tion being so complete that many other large industries
studied the plan and adapted it to their needs.
The financial stress of the post-war era soon passed. By
June 30, 1922, the Corporation was out of debt, and for
the balance of that year carried no bank loans, yet its cash
had been so mobilized that it had a large potential borrow-
ing capacity.
New Era Under President du Pont 203
The Corporation marched out of the post-war depression
on a pair of seven-league boots. One of these was the in-
ternal reorganization already discussed. The other was the
fruit of an energetic development of automobiles partici-
pated in by many companies but in which General Motors
played no small part through the activities of its research
department and those of affiliated companies. These im-
provements induced enough buying to make 1922 notable
for the largest volume of business in units to date. Two
years after General Motors had approached bottom in
1921 it was again riding the crest in 1923.
Whereas in 1921 the Corporation lost $38,680,770 — the
only deficit recorded in the history of General Motors,
yet the following year saw a complete reversal with
$54,474,493 net income available for dividends. Dividends
were paid at the rate of $i a share through 1921, but the
quarterly dividend of 25 cents due February i, 1922, was
passed as a matter of precaution. Prompt recovery, how-
ever, permitted the payment of a special 50 cents dividend
in December. During the 1921 slump the average number
of employees decreased by 35,000 but 1922, with 65,345 on
the pay roll that year, saw the beginning of another up-
ward swing in employment.
Among the timely acts of the period were :
Sheridan at Muncie, Indiana, and Scripps-Booth at De-
troit, were discontinued. During its short life Sheridan
was produced at the former Interstate plant.
The Samson tractor plants at Janesville, Wisconsin, were
switched to automobile production.
General Motors Building Corporation was formed to
hold and operate the $20,000,000 office building in
Detroit.
Saginaw Malleable Iron Company was acquired.
The outstanding shares of the Klaxon Company were
acquired by exchange.
The Janesville Electric Company was sold to Halsey,
Stuart & Company, acting for power interests.
Modern Housing Corporation shares were reduced from
17,500 to 1,750, $100 par.
204 The Turning Wheel
The Corporation subscribed for 8,000 shares of the Gen-
eral Motors Acceptance Corporation at $125 a share,
in the sum of $1,000,000.
Another sale of this period, indicative of the Corpora-
tion's efforts to forsake the real estate and home-building
field where possible without distress to employees, was the
sale by Harrison Radiator of 875 shares in the Lockport
Homes Company.
Perhaps more significant for the Corporation than any
other activity of the period was the drive which began in
1921 to improve the quality of its cars. Buick and Cadillac
were in no need of overhauling, but the low-priced cars —
Chevrolet, Oldsmobile, and Oakland — revealed weaknesses
which flowed naturally from the post-war conditions. Then
the cry had been for more and more production, with the
result that engineering improvements had been postponed
or overlooked entirely. As trade slackened, weak mechani-
cal units began to affect both sales and reputation. One by
one these problems were grappled with firmly. Under
President du Pont began the long struggle to rehabilitate
Chevrolet and establish it as the Corporation's leader in
quantity production and earnings, which has finally made
that subsidiary the world's leader in the low-priced field.
Oldsmobile and Oakland, in their respective price ranges,
were put under similar treatment. This farsighted policy
proved immensely beneficial in after-years, bringing the
Corporation to new levels of earnings and efficiency. In-
deed, it may be held as the chief determining factor in lift-
ing the Corporation to the impressive totals it reached from
1925 onward. Moreover, the lessons learned and remedies
applied from 1920 to 1923 were to prove invaluable in the
greater stress of 1930 to 1933.
On May 10, 1923, Pierre S. du Pont retired as president.
The two and a half years of Mr. du Pont's presidency saw
the Corporation rise swiftly from a perilous position to new
levels of profits and financial stability. Dead wood had been
cut away, and the weak properties brought to increased
efficiency. One by one the Corporation's great producers
had been taken in hand, tuned up, and placed in a position
New Era Under President du Pont 205
of market leadership. Progress had been made toward
integrating a key control at headquarters. This eased inter-
plant relations without reducing too greatly the responsibili-
ties of plant managers, whose interest was to be further
roused by the creation of the Managers' Securities Com-
pany a little later. Employee morale had been achieved by
the maintenance of high wages, generous bonuses, and the
highly successful conclusion of the first Employee Savings
Fund program.
With the Corporation in this favorable condition, Presi-
dent du Pont, certain that the situation he went in to
remedy had been fully cured, laid down the responsibilities
of the presidency to return to his other large affairs. He
was to remain chairman of the board for six years more.
It is not too much praise to say that he saved General
Motors by taking the helm in bad weather and effecting
such reforms that it could not fail to reap the rewards of
many of the policies he formulated. The long-range policies
and forward views which Mr. du Pont took are still effec-
tive in Corporation thought and practice, and will continue
to be influential there for many years to come. On leaving
the presidency he attributed a large measure of the Cor-
poration's successful development to Mr. Alfred P. Sloan,
Jr., vice-president in charge of operations, who succeeded
him in office.
Mr. Sloan entered the Corporation as a director on
November 7, 1918, incident to the merging of United
Motors, of which he had been president, and at first had
charge of the operation of the United Motors group. With
Mr. Durant he had been an important figure in the creation
of United Motors, bringing into that organization the
Hyatt Roller Bearing Company, with which he had long
been associated. Combining technical training with executive
experience, he was widely known throughout industrial
America even before he assumed a high place in General
Motors councils, and this acquaintanceship later brought
into the General Motors family several of its present units.
That Mr. Sloan also possessed sales insight and had been
a force in working out the coordinating reforms described
in this chapter may be gathered from a tribute reported
ALFRED P. SLOAN, JR.
President, General Motors Corporation, 1923-
206
New Era Under President du Pont 207
by B. C. Forbes in the New York American, September 21,
1927:
When he was selected president, in 1923, to succeed Pierre S. du
Pont, the latter made this public announcement: "The greater
part of the successful development of the Corporation's operations
and building up of a strong manufacturing and sales organization
is due to Mr. Sloan."
As General Motors integrated its policies and undertook
a systematic supervision of its extended operations under
Mr. Sloan as vice-president in charge of operations, he
proved his fitness for the higher office so well that, when
Mr. du Pont laid down the reins, there was never any ques-
tion who would be chosen to succeed him as president. In
him the Corporation secured an operating head possessing
a combination of technical training, executive experience,
and financial sense.
By 1923 General Motors had gained an important part
of a trade already of gigantic proportions and destined to
grow to even greater heights. America was just beginning
to realize what the motor car meant to it economically and
socially. The magnitude of the ever-growing industry is
revealed in these statistics drawn from the 1923 census of
manufactures :
Three hundred and fifty-one factories were operated by the automo-
bile industry in the United States and the District of Columbia
— 54 being in the state of Michigan.
More than 318,000 persons were directly employed in the manu-
facture of vehicles in that year and 3,105,000 were benefited in-
directly by the industry.
A billion dollars was being spent on highways and more than
$142,000,000 in the transportation by rail of completed vehicles.
Eighty-five percent of the gasoline consumed in the United
States during that year was used in cars and trucks.
More than 10 percent of the products of the steel and iron
industry were used in the production of motor cars or of their
parts and accessories.
One hundred and sixty establishments were engaged in the
manufacture of tires and inner tubes while a total of 528 manu-
factured rubber products.
208
The Turning Wheel
Of the thriving automotive trade General Motors al-
ready enjoyed a large share. After fifteen years of growth,
punctuated by two stressful periods, General Motors in
1923 had reached unquestioned financial stability, had dis-
covered the formula by which decentralized operations
could be correlated and controlled within limits of efficiency,
and had acquired the good-will of millions of satisfied
buyers.
Opel Six at Shanghai, China
Chapter XV
ROUNDING OUT GENERAL MOTORS
A
FTER the initial speed of accumulations had been
checked and balanced by the banker reorganization of
1910-15, General Motors expansion came from two
sources. By far the most impressive elements in the growth
of the Corporation since 1923 have been written into the
record by the internal growth of various divisions, chiefly
the great car divisions and the accessory divisions supply-
ing them, accounts of which will be found elsewhere under
divisional heads. Another source of growth has been the
purchase and adaptation of manufacturing units and service
organizations which it seemed eminently desirable and nec-
essary to control in the interest of industrial competence.
Strong reasons began to develop soon after 1923 im-
pelling the Corporation to fortify itself wherever possible
for a future which obviously would be considerably different
from its past. Evidence began to accumulate that the in-
dustry as a whole was approaching stability. The phenom-
enal popularity of the motoi* car in its early stages had
provided such large profits that many errors of judgment
had been written off almost without notice. That era of
"easy come, easy go" had passed, and with its passing the
business of manufacturing motor cars became concentrated
in fewer hands.
This "sweating-out" process had been going on all
through the life of General Motors, and had in fact threat-
ened various of its units at one time or another. The more
209
210 The Turning Wheel
than 300 manufacturers of 1908 had been reduced to 189
by 1914 and to 143 by 1923; these figures including pro-
motions and other short-lived efforts. Of these hundreds,
twenty-five manufacturing units would do more than 98 per-
cent of the business in 1931.
The continued progress of the leaders created the im-
pression that the entire industry was proceeding at the
earlier rate of growth, whereas the truth was, as Mr. Sloan
told the automobile editors in his Proving Ground address
in 1927, in discussing the so-called saturation point, that
"The industry has not grown much during the past three or
four years. It is practically stabilized at the present [1927].
What has taken place is a shift from one manufacturer to
another."
The trend from 1923 to 1927 meant a basic shift of the
industry's attitude to the market. Henceforth the motor
cars would have to be sold, instead of merely demonstrated.
They must be advertised more and serviced better. Research
and improved methods of manufacturing would have to be
constantly speeded up to produce better and better cars for
a market ever growing more sternly competitive. Precision
methods, long applied in factory production, were equally
needed in other branches of the trade — in the calculation
of logical production programs, in the accounting systems
of dealers, etc. The industry had come of age and, with
maturity, competition brought new responsibilities for
management. Such increase in volume as developed would
have to come from three sources : replacements, population
growth, and the increased use of automobiles. Moreover,
the share of business received by any producer would have
to be secured by hard work and careful planning rather
than through luck, boldness, or blind reliance on general
prosperity.
Consequently, it was time to insure unquestioned control
of certain essential supplies and to adopt, with relation to
those sources once they were in hand, such improvements in
their processes as would bring their goods into the Cor-
poration's productive cycle as efficiently as possible.
A number of these additions merely registered the Cor-
poration's completion of ownership in properties partly
Rounding Out General Motors 211
owned before and already an essential part of the pro-
duction chain. In this category was Brown-Lipe-Chapin
Company of Syracuse, New York, which had been making
differentials for General Motors cars almost from the
latter's birth, and in which General Motors had been in-
fluential for years by reason of a large stock ownership. On
December 19, 1922, the famous Syracuse company became
a completely owned division of General Motors.
Armstrong Spring Company of Flint, though under vari-
ous corporate ownerships during the period, had been
making springs for General Motors for many years, work-
ing closely with the chief car divisions. It was purchased by
the Corporation in December, 1923, becoming a wholly
owned division.
In the field, perhaps the outstanding development of 1924
was the purchase and initial improvement of the Proving
Ground near Milford, Michigan. Within easy reach of the
Corporation's automobile plants at Detroit, Pontiac, Flint,
and Lansing, the site was selected after an intensive search
for a tract where surfaces and contours would provide the
greatest variety of tests for motor cars. Here were heavy
grades, sand and gravel hills, marshy lanes, and muddy
bogs. Since the purchase, concrete and gravel roads, and
a wide range of other road surfaces have been added and
shops erected, where cars are taken down and examined
after being put through their paces on long, stiff journeys
over these varied highways. At the Proving Ground, which
is really a great outdoor laboratory, all General Motors
models are tested with the utmost rigor before they are
placed in production by the various car divisions.
In the first year of General Motors' history, W. C. Durant
used to tell his racing and test pilots to drive until their cars
broke down under the strain, in an effort to locate weak-
nesses and indicate where improvements should be made.
Now, sixteen years later, this idea materialized in a mam-
moth undertaking in which that exacting work could go on
under scientific supervision, as part of a broad research
program. The Proving Ground is a large-scale enterprise
in fact-finding for the protection of the buying public.
212 The Turning Wheel
Into the corporation field in 1924 also came the new
Ethyl Gasoline Corporation to market the "knockless" fuel
which General Motors chemists had evolved through years
of alert and adventurous research. The story of Ethyl will
be told in detail elsewhere;1 it is one of the characteristic
triumphs of the open mind in industrial research. To market
this new fuel a $5,000,000 corporation was formed, and
$1,150,000 was subscribed in 1924, with Standard Oil of
New Jersey and General Motors each having a 50 percent
interest.
Fisher Body, with large earnings and the prospect of
more, expanded its capital stock to 2,400,000 shares of $25
par value to take the place of 600,000 shares outstanding.
Shortly after, Fisher began, with the acquisition of Fleet-
wood Corporation, an important growth cycle of its own,
narrated in Chapter xx: "Body by Fisher."
Negotiations had been in progress for some time with
the Hertz interests of Chicago looking toward the acquisi-
tion of an interest in the Yellow Cab Manufacturing Com-
pany of Chicago. On August 13, 1925, the directors
approved the offer of that company relative to the transfer
of the General Motors Truck Division to a new company,
the Yellow Truck & Coach Manufacturing Company, a
holding company in which General Motors Corporation ac-
quired a majority interest. In addition to General Motors
Truck, with large plants at Pontiac, Yellow Truck & Coach
Manufacturing Company owns all or part of several other
companies.2
October 21, 1925, marks the proposal by Vauxhall
Motors, Ltd., of Luton, England, of a plan whereby Gen-
eral Motors entered the field of British automobile manu-
facture under excellent auspices.3 This plan, which was
consummated on November 24th, required a total outlay
by General Motors of £510,000, or roughly $2,500,000 at
par of exchange, for which the Corporation secured a con-
trolling interest in an established British company with a
possible production of 25,000 cars a year. Since the
*See Chap. XIX: "Research: the March of the Open Mind."
*See Chap. XXII: "Commercial Vehicles."
3See Chap. XVIII: "General Motors Across the Seas."
Rounding Out General Motors 213
McKenna duties increased the tariff on American cars enter-
ing British markets, and preferential duties were in force in
other parts of the Empire, the advantages of this coalition
have been amply manifested.
Another expansion of General Motors Acceptance Cor-
poration capital occurred in December, the Corporation
subscribing for 45,000 shares of GMAC stock at $125 a
share, or $5,625,000. Instalment sales had grown tremen-
dously in volume with the growing confidence of the
country, and the country was approaching the point at
which more than half the automobile output would be
bought on credit.
General Exchange Insurance Corporation, with a capital
of $500,000 and surplus of $1,000,000, was formed by
General Motors Corporation to handle the vast insurance
business arising through sales financed by General Motors
Acceptance Corporation. The timeliness of this innovation
was soon demonstrated, for within two years GEIC made
profits of $676,000.*
After making a step toward retrenchment by author-
izing the liquidation of the Lancaster Steel Products
Company in 1926, the directors authorized two other large
investments. Yellow Truck & Coach Manufacturing Com-
pany, in order to provide for expansion of its operations,
sold additional capital stock, for the proceeds amounting to
$14,000,000. General Motors underwrote the entire issue
and secured its pro rata share. The other was the inaugura-
tion of a plan to buy up to $35,000,000 worth of Common
stock before the close of 1930 for the second Managers
Securities Company.
Following this important move the Fisher group was also
greatly expanded by the construction and acquisition of new
properties and companies making necessary supplies —
among them the Flint plant, the largest in the Fisher en-
semble. Also, the Fisher structure was simplified by the
purchase of the affiliated Ohio company. The "Golden
*A full account of General Exchange Corporation and its successor, Gen-
eral Exchange Insurance Corporation, will be found in Chap. XXVII:
"Financing and Insuring the Buyer."
214 The Turning Wheel
'Twenties" were busy years for Fisher, with four incorpora-
tions or acquisitions in 1923, two in 1924, two in 1925, five
in 1926, two in 1928, and one in 1929. The complete
Fisher set-up will be found in Chapter xx.
August, 1926, marked the merger of selling efforts on
certain important lines of the Corporation's electrical
products in the formation of the Delco-Remy Corporation
of Delaware, which was followed presently by the transfer
of the starting, lighting, and ignition business of Delco,
from Dayton to Anderson, Indiana, the seat of the present
Delco-Remy division.
On November n, 1926, General Motors Acceptance
Corporation stock was increased to $25,000,000, since it
was clear that the country had overcome its hesitation of
the spring and was confidently going forward, giving every
promise of availing itself of time-payment plans to the full
in automobile purchases. Another $10,000,000 increase in
GMAC stock was ordered in June, 1927, and later GMAC
acquired the General Exchange Insurance Corporation at
its net asset value as of June 30, $2,176,702, the original
cost to the Corporation having been only $1,500,000.
During these busy and prosperous years interests were
also acquired in Bendix Aviation of Chicago; Fokker Air-
craft Corporation of America, the latter becoming the Gen-
eral Aviation Corporation; Winton Engine of Cleveland,
Ohio, makers of marine and stationary engines for rail-
way use; McKinnon Industries of St. Catharines, Ontario;
the Guide Lamp Company of Cleveland, Ohio; North East
Electric of Rochester, New York; and others.
All through this period also there was an unceasing flow
of changes in plant utilization. The union of Delco and
Remy at Anderson, Indiana, has resulted in a large industry,
although not all Delco activities were moved. There re-
mains in Dayton the Delco Products Corporation, making
Lovejoy Hydraulic shock absorbers, small motors, and a
wide range of other appliances. North East Electric at
Rochester, New York, bought in 1929, soon became Delco
Appliance Corporation, and to it were transferred the
Delco Light business and other electrical lines — chiefly in
the household appliance and radio fields. This shift of
Rounding Out General Motors 215
functions toward a more efficient alignment, both geograph-
ically and technically, has become more marked since the
year 1930.
General Motors thus has become a large producer of
motor-driven household equipment. The Frigidaire Cor-
poration manufactures electric refrigerators, beverage and
water coolers, refrigerating apparatus for households,
hotels, restaurants, and apartments, air conditioning equip-
ment for homes, offices, shops and railway cars. Delco
Appliance Corporation makes electric light and power
plants (Delco Light), electric motors and blowers, gas-
producing units (Delcogas), and Delco oil burners, vacuum
cleaners and water pumps, and electric fans. Small motors
are made by Delco Products at Dayton. Gas refrigerators
for household and apartment use are produced by the
Faraday Refrigerator Corporation, also at Dayton.
The process of growth by purchase and development still
goes on, though purchases of other properties are naturally
at a reduced rate. A recent acquisition, in 1932, was the
Packard Electric Corporation of Warren, Ohio, manu-
facturers of automotive cable products. The name has early
connections with the industry, as the Packard car originated
there. It will be noted that the Corporation in its twenty-
five years of history has withdrawn from several activities
for substantial reasons, and the motives making for aban-
donment have, of course, been especially strong from 1930
to 1933. The most important of these recent changes was
the removal of Muncie Products activities from Muncie,
Indiana, and the transfer of Brown-Lipe-Chapin activities
to Buick and other plants.
With the exception of 1918, the war year in which ma-
terials could not be secured to satisfy the public demand,
and in 1921, when the post-war slump reduced production
by one quarter, the automobile industry had marched
steadily forward in the quantity and value of its products
for a quarter of a century. In the ten years from 1912 to
1922, the annual production had risen from 378,000 units
with a wholesale value of $378,000,000 to 2,646,229 units
with a wholesale value of $1,793,022,708. In 1923, the
totals bulged to 4,180,450, valued at $2,592,033,428.
216 The Turning Wheel
A definite periodicity marks automobile production
through the whole decade of the 'twenties. The trade began
a succession of three-year cycles, apparently as a result of
its own circumstances and enthusiasms, as follows :
1921 Black year 1924 Black year 1927 Black year
1922 Goodyear 1925 Goodyear 1928 Goodyear
1923 Banner year 1926 Banner year 1929 Banner year
The descriptions are, of course, merely relative, as new
heights were being scaled all through the period, so that the
good year of 1925 produced a larger volume than the
banner year of 1923, and the good year of 1928 brought
more business than the banner year of 1926. The figures
on units manufactured, in the United States and Canada,
and their wholesale value for the period are:
Units Value
1921 1,682,365 $1,261,666,550
1922 2,646,229 1,793,022,708
1923 4,180,450 2,592,033,428
1924 3,737,786 2,367,413,015
1925 4,427,800 3,015,163,562
1926 4,505,661 3,214,817,491
1927 3,580,380 2,700,705,743
1928 4,601,141 3,162,798,880
1929 5,621,715 3,576,645,881
Owing to conditions which may be considered special,
General Motors entirely escaped the 1927 reduction in
volume common to the industry. Net sales for the Corpora-
tion rose by more than $200,000,000 over the 1926 figure,
reaching $1,269,519,673, or, on the basis of units sold,
nearly 44 percent of the entire output for the United States
and Canada in 1927.
The trend is upward but not constant; after every banner
year as noted, there is a dip, and then begins a two-year
rise to new highs. To those aware of this swing of the
pendulum it seemed likely that 1926 would be another
banner year, unless there should be a general slackening of
trade. For five years there had been a steady appreciation
in urban real estate and security values, but farm produce
had never recovered fully from the post-war price slump,
Rounding Out General Motors 217
and the condition of the farmers could not be considered
good. The disparity between the farmer's dollar and the
urban dollar was marked enough to cause some disquietude;
only in automobiles and tires, owing to manufacturing im-
provements, could the farmer buy to advantage compared
with the pre-war ratio. Moreover, while automobile prices
had dropped steadily from 1912 to 1917, and again from
the war peak of 1918 to 1924, they had shown a rising
tendency in 1924 and 1925. Students of automobile eco-
nomics were asking themselves whether the upward swing
could continue; the Stock Exchange drop of March, 1926,
enough to call forth a reassuring interview from President
Coolidge, indicated a gathering tension.
The country, however, gathered courage and went on.
The year 1926 rolled up the record figures of nearly
$3,215,000,000 in wholesale value of the automobile in-
dustry's output, and the automobile cycle swung through
another three-year period to even larger figures.
Economic historians will be debating the long continuance
of the prosperity of the 1920*8 for many years to come. All
precedents indicated that the boom should have reached
its zenith before 1929. Evidently there were new factors
in the equation. Among them were: increased efficiency in
industrial production, growth of export trade, the nation's
increase in gold holdings, and the wider distribution of
wealth. Still another, of special moment to the automobile
industry, was the enormous extension of instalment selling.
The amazing totals of 1928 and 1929 can only be ex-
plained by boom conditions confounding all calculations. We
have seen how firmly Mr. Sloan, with all available data on
hand, considered in 1927 that the industry as a whole was
approaching stabilization, in which continued demand would
be largely for replacement purposes, with some allowance
for growth due to increasing population and gain in
motor-mindedness. Yet in the next two years the automobile
industry swept aside all these conclusions of conservatism
under the lash of a demanding market.
Chapter XVI
LATER HISTORIES OF PASSENGER CAR
DIVISIONS
HE early histories of the four of the five passenger car
divisions of General Motors have been carried down in
previous chapters to the time they joined General Motors
of New Jersey, and that of Pontiac from its origins in
Oakland down to the present time. This chapter presents
briefly the stories of Buick, Cadillac, Chevrolet and Olds-
mobile after they were merged into General Motors.
These compressed histories necessarily omit many inter-
esting details and pertinent facts, as each of the car
divisions is in itself an important, large-scale industrial
operation deserving of more extended treatment. All have
compiled historical material in considerable amount, some
of which has been circulated widely in pamphlets and
through press releases.
BUICK
When Buick became the foundation stone of General
Motors in 1908, it had already won leadership in the
medium-priced field, and in volume of business it ranked
first in the American automobile field. Ever since it has been
one of the chief pillars of Corporation strength. From an
output of only sixteen cars in 1903 Buick has reached a
total production of more than 2,500,000 units, more than
half of which are still in operation, including models of
every year except the first. Its largest year, in unit sales, was
1926, when 280,009 Buicks were sold.
218
Passenger Car Divisions 219
During its life-span of thirty years Buick has held closely
to the medium-price range. In only six of those years has
the average Buick — the middle-priced car of all its models
for the year — exceeded $2,000. Only one model has been
sold below $1,000. One result of this consistent price
policy has been the creation of a very large body of buyers
who continue to order Buicks year after year. While many
makes of cars have found new price levels in the history
of the industry, a few rising and more dropping in the
scale, Buick has kept its original position, compensating the
customer as costs declined by adding to the value of the
product year by year.
When Buick began, it was a manufacturing policy, com-
mon to the entire industry, to sell a bare car at a listed
price and then furnish, as extra equipment at set prices,
many appliances necessary to comfortable motoring which
today's buyer looks upon as essential. For instance, the
famous Model F two-cylinder Buick sold at $1,250, F.O.B.
factory, but unless the customer bought and paid for a top
he would ride in the rain; unless he bought lamps he would
ride only by day; unless he bought a windshield he sat ex-
posed to the blasts of Boreas. Extra equipment lists often
included such essential elements as tires, horn, and gauges.
Consequently a comparison of automobile prices, histori-
cally, means very little until manufacturers reached the point
of selling their cars completely equipped. What one gets for
his money is quite as important as what he pays.
Through this development from the skeleton car of the
old days to the fully equipped car of the present, Buick was
usually to be found somewhat to the fore in the matter of
shifting extra equipment to standard equipment, rather than
following the policy of pushing the price down and keeping
the charges for extras up. For that reason a year-by-year
statement of additions to Buick equipment is an interesting
exhibit of the stages through which the American automo-
bile industry advanced toward the present practice of equip-
ping a car completely.
In the evolution of the automobile, both as a machine
and as a style vehicle, Buick has always been consistently
progressive, originating many improvements and applying
220 The Turning Wheel
others as soon as they developed reliability. For that reason,
if one desires to see the steps by which the automobile has
reached its present appearance, he can find some of the
stages of that progress in the comparison of Buick speci-
fications. One can see the automobile growing through addi-
tions like these: 1903-04, folding celluloid wind-breaker;
1905-06, side curtains; 1907-08, Presto-lite headlights;
1911, first closed car, a limousine, folding seats in tonneau;
1912, mohair top; 1913, clear vision windshield, electric
lights, nickel trimmings instead of brass; 1914, first sedan.
On the mechanical side the progress can be charted by a
few of many thousands of transitions: 1903-04, safety
cranking device; 1904-05, disc clutch, steel drive shaft;
1907-08, aluminum crankcase, magneto, spark and gas
control sector on steering wheel; 1909-10, pressed steel
frame; 1911, oil splash system; etc., etc.
Bob Burman at wheel of "Old 41" famous Buick racer, 1909
Buick pioneered in glass fronts, fore-doors, internal ex-
panding brakes and four-wheel brakes, and in the develop-
ment of the rear axle assembly with differential.
In order to test its cars at high speed, Buick built a pri-
vate track on its Flint property, where such speed and
endurance were developed that its cars were soon entered in
the more important races and hill-climbing contests. The
sporting interest has already been referred to as develop-
ing automobile enthusiasm in the public. While amateurs
Passenger Car Divisions 221
might start these competitive events, the manufacturers,
noting both their news value and test value, provided the
competition, spending large sums to secure famous drivers.
Buick's most famous racing team consisted of seven pilots,
among whom were four of the first rank — Bob Burman,
Louis Strang, and the Chevrolet brothers, Louis and Arthur.
Among the more famous events of the many won by
Buick during its first eight years were : hill climbs at Eagle
Rock, Mt. Washington, and Pike's Peak'; the Vanderbilt
Cup road race of 100 miles; the French Grand Prix; the
595-mile Elgin, and the 482-mile Los Angeles-Phoenix;
track victories at Brooklands, England; St. Petersburg,
Russia; and the Indianapolis Speedway. The Russian vic-
tory brought to Buick the Imperial trophy.
At the Indianapolis race appeared two odd cars, like big
June bugs, with the name "Buick" on the side of each body.
These two "Buick Bugs" were piloted by Bob Burman and
the Chevrolets, Arthur and Louis. In the next two years
they broke more records than any other team. In 1911 at
Jacksonville, Florida, Bob Burman driving a "Buick Bug"
established two straightaway records regardless of class:
50 miles in 35 minutes and 52.3 seconds, and two days later,
20 miles in 13 minutes and 11.92 seconds. Both records
stood for more than ten years.
Victories like these were the result of careful organiza-
tion and training, but if one retreats into the past as far
as the car which is still affectionately called "old Model F"
he finds amateurs at the wheel, and an informality like that
of a country fair. When his little two-cylinder Buick first
won the Eagle Rock hill climb, cutting the existing record
almost in two, Walter L. Marr was asked how his small
motor could develop the power to defeat much larger and
more highly powered cars. He replied, quickly: "It's a
Valve-in-the-head' motor." The phrase caught on and has
been retained.
With the complete professionalizing of the sport, and the
evident trend toward specially designed racing cars, Buick's
interest in racing ceased while its great racing team was
still at the top of its success. Although the records estab-
lished by the non-stock racing- cars of the present are being
222 The Turning Wheel
bettered year by year, some Buick records still stand in the
stock classification.
From 1910 to 1920 Buick production rose from approxi-
mately 20,000 cars to more than 120,000 a year. Only three
of those years show a recession from the preceding one,
that of 1911 reflecting the conditions which brought on the
banker control of General Motors, and that of 1918 being
explained by the difficulty of securing material in a war
year. During that decade the closed car came into its
own, each year showing a larger percentage of production
until the open car, except in sport models, has become a
rarity.
Mr. Harry H. Bassett became president of Buick in
1919. His was a personality which endeared him to men of
all positions both inside and outside the organization, his
interest in the welfare of his workmen being particularly
keen.1 He had been with the Remington Arms Company
for fourteen years when, in 1905, Mr. C. S. Mott per-
suaded him to enter the Weston-Mott Company at Utica.
The Weston-Mott plant at Flint being established in the
meantime, in the next year Mr. Bassett went there as
assistant factory manager. By 1913 he was made general
manager, later also vice-president. On consolidation of
Weston-Mott and Buick in 1916 he became the assistant
general manager of Buick, the same year it was made a
division of General Motors. In 1919 he became general
manager, also a vice-president of General Motors, and then
assumed the presidency of Buick Motor Company. In 1924
he became a member of General Motors' Executive Com-
mittee.
In Mr. Bassett's first year with Buick, capacity was in-
creased to 750 cars per day, and in 1924 to 1,200 cars per
day. The millionth Buick appeared in 1923. Upon his death
Mr. E. T. Strong, who had been sales manager, became
president in 1926 and was succeeded by Mr. I. J. Reuter in
1932. In October, 1933, Mr. Reuter resigned and was suc-
ceeded as general manager by Harlowe H. Curtice, who
had been president of AC Spark Plug Company since 1929.
*See Chap. XXVIII for an account of his influence on General Motors In-
stitute of Technology, etc.
Passenger Car Divisions
223
In 1928 Buick Motor Company celebrated its Silver
Jubilee, the twenty-fifth anniversary of the organization,
producing at that time its Silver Jubilee model.
During 1933 Buick's functions have been enlarged by the
addition of the former Armstrong Spring division of Flint
and the transfer to Flint from Syracuse, New York, and
Muncie, Indiana, of differential and transmission manu-
facture.
CADILLAC AND LA SALLE
In 1909 General Motors Company acquired the entire
Common capital stock of the Cadillac Motor Car Com-
pany consisting of $1,500,000, par value, paying therefor
Cadillac: the first car equipped with an electric self-starter
$5,169,200 in General Motors Company Preferred stock
and $500,050 in cash or a total of $5,669,250.
In 1910 battery ignition was placed on Cadillac. The
same year the first "big" order for closed cars (150 bodies)
was given to Fisher Body Company. In 1912 the first
electric self-starter was installed in Cadillac as standard
equipment, as related in Chapter XIX: "Research: The
March of the Open Mind." Mr. C. F. Kettering, the in-
ventor of the starter, drove to the opening of the General
224 The Turning Wheel
Motors building at the Chicago Century of Progress Ex-
position in 1933, in one of these 1912 Cadillacs. For this
contribution, Cadillac in 1912 won for the second time the
Dewar trophy, awarded by the Royal Automobile Club of
London for the greatest advance in automobile construction
during the preceding year, its first victory having been
awarded for interchangeability of parts five years earlier.2
Cadillac introduced, in 1914, the 9<D-degree v-type eight-
cylinder engine, the first eight-cylinder high-speed automo-
bile power plant built in this country. This achievement of
Cadillac was honored by the Smithsonian Institution which
placed one of the first Cadillacs of this type in its museum
in Washington. Every Cadillac built from 1914 to 1927
was powered by this same type engine. Even the bore and
stroke, piston displacement and S. A. E. horsepower rating
remained the same. In this period refinements in the power
plant included thermostatic carburetion, the compensated
shaft, and a positive system of crankcase ventilation.
Other honors which came to Cadillac are treated in
Chapter xn: "The War Years."
In 1917 Mr. Henry M. Leland resigned as president. He
remained active in business and civic affairs until shortly
before his death in 1932, at the age of eighty-nine. He was
succeeded by Mr. R. H. Collins, who was president of
Cadillac until 1921, during a period of rapid expansion.
Mr. H. H. Rice then became president, remaining until
1925 when Mr. Laurence P. Fisher assumed the position.
Soon afterward Cadillac began a $5,000,000 expansion
program. In 1927 the La Salle v-8 was introduced to a
market which absorbed nearly 60,000 La Salles in the next
three years^ a sales record unparalleled for a new car in its
price and quality class.
Both Cadillac and La Salle appeared in 1928 with non-
shattering glass, the first cars to leave factories with that
safeguard. Later in the year they were also equipped with
the famous synchro-mesh transmission, in its day a decided
innovation.
Synchro-mesh, the silent gear shift, was brought to per-
fection by Cadillac. Some ten models of this "silent shift"
*See Chap. VII: "Cadillac: The Triumph of Precision."
Passenger Car Divisions 225
transmission were tried experimentally on twenty-five cars,
which were driven 1,500,000 miles on the General Motors
Proving Ground. Synchro-mesh was then introduced to the
public, on Cadillac and La Salle in 1928, and later became
standard equipment for General Motors cars.
Synchro-mesh marked a step forward in the direction of
safety of operation with the driver in complete control of
the car at all times, since it allows him to take advantage
of the braking power of the engine in either high or second
gear. Direct acceleration, a desirable feature in traffic, is
also hastened by synchro-mesh. This transmission is de-
signed to eliminate the clashing of gears and provide silent
shifting at all car speeds.
Synchro-mesh is thus explained from the mechanical
standpoint :
The transmission consists basically of a small friction clutch which
causes the two spinning members of the gears to revolve at iden-
tical speeds. When the driver moves the gear shift lever from the
neutral position into second or high, one or the other of the two
clutches, actuated by the lever, is engaged long enough to syn-
chronize the gears. Since the gears are revolving at the same speed
they engage with complete ease and without the possibility of
clashing.
After three years' experimental work, Cadillac announced
America's first sixteen-cylinder automobile, January, 1930.
Its favorable reception led to Cadillac completing the
series of multiple cylinder power plants by bringing out the
v-12 later in the year. More than 450,000 Cadillacs and
La Salles had been produced by the end of 1932.
Cadillac's evolution has been toward size and quality.
From the one-cylinder engine which made its early reputa-
tion, Cadillac has risen to sixteen cylinders in its largest
models. Even its one-cylinder engine was a precision job,
giving more power than its pioneer competitors because of
closer machining. The degree of precision has been in-
creased steadily, reaching a high stage of refinement. In an
industry which as a whole leads all others in combining large
output with close work, Cadillac ranks as a leader. A
master-set of precision gauge blocks, guaranteed to be ac-
curate to the one millionth part of an inch, lies carefully
226 The Turning Wheel
guarded in a velvet-lined case as a talisman of measurement
accuracy in the Cadillac plant.
More than a dozen similar sets, accurate to three mil-
lionths of an inch, are regularly used in the tool and gauge
department to check other master gauges. There are more
than 27,000 Cadillac and La Salle clearances which must be
accurate to within one thousandth of an inch; there are
37,000 that must be accurate to less than two one thou-
sandths of an inch; there are 800 operations carried out
with such vigilance as to allow only one fourth to one half
of one thousandth of an inch.
As one passes through the Cadillac plant he sees mate-
rials being tested with cameras which multiply their struc-
ture one thousand times; he sees diamond-pointed weights
determining their mass hardness; he sees torsion machines
and vibratory machines subjecting them to every kind of
strain; his eyes fall on row upon row of scales and gauges
in the hands of skilled workers; he witnesses each individual
part of the car both before and after assembly being in-
spected; and he leaves with the feeling that he has been in
a temple of precision where quality dwells.
Cadillac now offers eight-, twelve- and sixteen-cylinder
cars and La Salle on two wheel-bases. Cadillac v-8 appears
in sixteen body styles, Cadillac v-12 in sixteen, while
Cadillac v-i6's are built only to order and limited to 400
a year, buyers having a practically unlimited choice in body
design and finish. La Salle, with eight cylinders, is produced
in seven models.
Cadillac's pioneering achievements were summarized
effectively in the Founders Section of the Automobile Trade
Journal of December i, 1924, as follows:
First to produce a car with parts sufficiently standardized to be inter-
changeable.
First to introduce a complete electrical system of cranking, light-
ing and ignition.
First to develop and incorporate thermostatic control of engine
cooling.
First in the United States to adopt Johansson gauge system of
fine measurements.
Passenger Car Divisions 227
First to build a truly high-grade car in quantity production, and
to sell at a moderate price.
First American car to win the international Dewar trophy,
awarded annually to the automobile making the greatest engineer-
ing advance. Won twice by Cadillac.
First in the United States to develop v-type, high speed, high
efficiency engine.
First in thermostatically controlled carburetion.
First to build an inherently balanced v-type eight-cylinder
engine — the vibrationless v-63.
To which might be added at this date :
First to build a sixteen-cylinder engine for stock use, and
First to install the silent synchro-mesh transmission.
Cadillac's record in the technical history of accurate
craftsmanship as applied to large production, which is the
most distinctive feature of America's contribution to ma-
chine practice, is unsurpassed by any automobile manu-
facturer.
CHEVROLET
Chevrolet's spectacular entry into the General Motors
family has been described. It was then a lusty child, seven
years old, but already giving evidence of gigantic stature
to come.
The seal had been set on decentralized operations by the
sale, in 1916, of the Detroit property opposite the Ford
Motor Company in Highland Park. If this, planned as the
seat of a great plant, had been used as the site of a great
central factory, as anticipated, Chevrolet's activities
would have been concentrated there instead of being spread
over the country, with Chevrolet manufacturing going on in
six American cities and assembly in ten.
Chevrolet received its present corporate form on Decem-
ber 24, 1917, when it was incorporated in New Jersey as a
sales company for $10,000, all issued and all owned by
General Motors Corporation. Henceforward Chevrolet
would rank as a division of General Motors, the largest
on the roster.
228
The Turning Wheel
After General Motors absorbed the Chevrolet Motor
Company of Delaware on May 2, 1918, Chevrolet em-
barked on a policy of acquiring its affiliates in which local
capital had been interested. Chevrolet Motor Company of
St. Louis was purchased on August ist, and Chevrolet
Motor Company of Canada on November ist. This policy
also brought Chevrolet of California under ownership in
i
W. S. KNUDSEN
Executive Vice-President, General Motors Corporation
1920. Meantime, assembly and sales, outlets were greatly
expanded. A new assembly plant was built in St. Louis. As
evidence of the driving power toward expansion, 500 re-
tail stores for direct distribution of product to customer
were authorized, and of these forty-eight had been opened
by August i, 1920. On December 22d, following, Karl W.
Zimmerschied became president of Chevrolet, succeeding
W. C. Durant.
General Motors of Canada took over all of Chevrolet's
Canadian operations January i, 1921. Various steps in re-
trenchment were taken to meet the adverse conditions of
the post-war slump.
Passenger Car Divisions 229
In March, 1922, Mr. Zimmerschied retired and was suc-
ceeded in authority by W. S. Knudsen, who, however,
ranked only as vice-president until 1924. Mr. Knudsen's
administration has seen the advance of Chevrolet to first
place among quantity producers. Almost immediately Chev-
rolet began to march. On October i, 1922, it took over
from General Motors the Central Products group in De-
troit, comprising the present gear, axle and forge plants;
also the Janesville, Wisconsin, plant of the former Samson
Tractor Company which was converted into an assembly
plant. New assembly plants were built at Buffalo, New
York, and Norwood, Ohio. Body-building activities of the
St. Louis Manufacturing Company were transferred to the
Fisher Body Corporation in 1923. A pressed metal plant
was placed in production in Flint in June.
When Mr. Knudsen became president of Chevrolet on
January 24, 1924, this great subsidiary of General Motors
had manufacturing plants in four cities — Detroit, Flint, Bay
City, Michigan; and Toledo, Ohio — six assembly plants
and sixteen regional sales organizations blanketing the
entire country.
The onward march continuing, new sales zones were
opened in many of the leading cities of the country. These
additions raised the total of zone offices to fifty-two, where
it remained until reduced to thirty-six in 1932.
Manufacturing facilities of the company were also in-
creased by these additions:
1925 — Acquisition of the Bloomfield, New Jersey, plant
for export boxing operations.
1926 — Acquisition of General Motors Truck Company
plant, No. 7, as of March 31, 1926, to increase the
production of front and rear axles. This plant had been
originally the home of Northway Motor & Manu-
facturing Company, one of the early purchases of
General Motors Company of New Jersey.
A new building was erected in Hamtramck, Michi-
gan, a suburb of Detroit, for the experimental depart-
ment of Chevrolet.
230 The Turning Wheel
1927 — Large expansion program completed. On Sep-
tember i, Chevrolet took over the Grey iron foundry
at Saginaw.
1928 — Production began in the new assembly plant at
Atlanta, and construction started on the Kansas City
assembly plant which entered production early in 1929.
Including Canada and export, Chevrolet built 1,188,053
cars and trucks in 1928, becoming the world leader in pro-
duction for the second consecutive year. Production on the
four-cylinder National model was discontinued in Decem-
ber, and the six-cylinder International model introduced on
January i, 1929. This change set a new price level for
six-cylinder cars, and in view of its novelty the public reac-
tion was eagerly awaited. The "six" was favorably received
from the start and in 1929 Chevrolet recorded its highest
output — 1,333,150 cars and trucks, a quantity more than
400 times as large as those produced in its first year, 1912,
when the total fell just short of 3,000. The six millionth
Chevrolet left the factory on July i, 1929 ; by the end of the
year 6,504,583 Chevrolets had been produced in the seven-
teen years of the company's life.
Only one considerable property has been added to Chev-
rolet since 1930, when the Martin-Parry Commercial Body
Company was purchased, for the purpose of building truck
bodies of types in general demand to be distributed through
Chevrolet zone offices. Reference is made to Chevrolet
truck sales in Chapter xxn : "Commercial Vehicles."
While total automobile sales for 1931 were off 29 per-
cent, Chevrolet's decline was only 9 per cent. All through
the depression Chevrolet's proportion of total automobile
sales has been rising.
For its second year as a "six," Chevrolet took rank as
the world's greatest producer of motor cars. For four of
the last six years — 1927,' 1928, 1931 and 1932 — it has led
the entire American automobile industry in number of units
sold in this country.
On April i, 1932, an important realignment of func-
tions between and among four of General Motors great
Passenger Car Divisions 231
producers brought to the Chevrolet organization increased
responsibilities, Pontiac manufacturing, service and account-
ing being put in charge of Mr. Knudsen in addition to his
former duties, while Mr. Reuter was placed at the head
of Buick and Oldsmobile.
On October 16, 1933, Mr. Knudsen became executive
vice-president of General Motors Corporation at Detroit
and chief executive officer there, with general supervision
over all car and body manufacturing operations in the
United States and Canada. M. E. Coyle, formerly vice-
president, succeeded to the presidency of Chevrolet.
With its vast production plants and its strategically
located assembly plants, with its own highly developed
engineering staff and the resources of General Motors be-
hind it, Chevrolet has made its way to sales leadership, and
in this Anniversary year of General Motors, is the best sell-
ing motor car in the world.
OLDSMOBILE
As the oldest of the General Motors car divisions, Olds
Motor Works takes a just pride in its history. In 1931 it
prepared a history of the company which contains this sum-
mary of its long career:
Olds Motor Works was not only the first organization to produce
passenger cars commercially, but it also pioneered many of the
important advancements made in the industry. The introduction
of the assembly line and of quantity production — steps which revo-
lutionized all existing automobile manufacturing methods and
which established a system that the majority of manufacturers
today are following — were instituted by Olds Motor Works in
the very early days of its career. Olds Motor Works produced the
first two-cylinder and four-cylinder cars — revolutionary designs
for that time. The early achievements of Oldsmobile established
public confidence in the automobile and made possible its further
development. Olds Motor Works has continued its pioneering
activities without cessation during the thirty-four years of its
existence, nearly every year bringing forth some new and valuable
development. The story of the Olds Motor Works is, in reality, a
cross-section of the history and progress of the automotive industry.
232 The Turning Wheel
General Motors bought Olds Motor Works in 1908,
three years after the latter's removal from Detroit to Lan-
sing, and immediately reorganized it. Production ran up to
1,690 cars in 1909, 150 of them being "sixes" of a model
developed in 1907 and first sold in 1908. Thus, within a
year after General Motors acquired a property which at
the moment seemed to many without a bright future, Olds-
mobile regained a good market position, standing as a
leader in the four-cylinder field and being a pioneer in the
six-cylinder field.
The celebrated Oldsmobile Limiteds, with their 5-inch by
6-inch motors and 42-inch wheels, appeared in 1910, when
310 were sold. This most distinctive automobile of the day
gave Oldsmobile the prestige of extreme luxuriousness. In
all, 825 of these huge six-cylinder cars were built in the
space of three years. Although highly successful from an
engineering standpoint, the market for them was neces-
sarily restricted, and the company's market reliance was the
special "four." Sales of the latter model dropped to 1525
in 1910, reflecting the difficulties into which General
Motors fell. The next four years were years of reorganiza-
tion and readjustment to market needs. Not until 1915 was
Oldsmobile again a market leader from the standpoint of
quantity production.
During this interval Oldsmobile began its course, still
continuing, as a manufacturer of cars light in weight but
high in quality. As compared with its larger predecessors,
the new Oldsmobile was planned to have equal finish and
material, size only being sacrificed. Consumers have since
become accustomed to high quality in small cars; but the
program was then novel and received such firm support
that Oldsmobile production leaped ahead, rising from
nearly 8,000 in 1915 to more than 22,000 in 1917. After
the lag of a war year in which supplies could not be obtained
for a large passenger car schedule, Oldsmobile scored an-
other marked advance in 1919 with 39,000 units. Of this
total more than 11,000 units were "eights." The first Olds-
mobile "eight," and the first offered to the American pub-
lic in its price class, appeared in 1915.
Passenger Car Divisions 233
When the United States entered the World War, Olds
Motor Works was one of the first automobile plants to get
into production on government work. During 1917-1918,
2,000 kitchen trailers were produced. A new motor plant
was built for the manufacture of Liberty Motors, although
never used for that purpose. This plant was completed and
considerable machinery installed by the time the Armistice
was signed in 1918. A swift change in plans was necessary.
By January i, 1919, machinery and tools had been moved
into the new plant from the Northway Motor Company at
Detroit, and production started on the eight-cylinder engine
which up to that time had been made at the Northway plant
under the supervision of the Oldsmobile engineering de-
partment.
On May 18, 1921, A. B. C. Hardy became president
and general manager. In years of service he was the eldest
of the General Motors executives. From 1892, when he
was made superintendent and secretary of the Wolverine
Carriage Company, to May, 1921, when he came to the
Olds Motor Works, he held practically every office of
responsibility in the carriage and automobile industry of
Michigan. In 1898 he was elected president of the Durant-
Dort Carriage Company, and in 1902 he organized Flint's
first automobile concern, the Flint Automobile Company.
Another round with carriage manufacturing, this time
in Iowa, and Mr. Hardy was ready to concede that the day
of the horse-drawn vehicle was nearly over. In 1914 he
became vice-president and general manager of the Little
Motor Car Company of Flint, and then of the Chevrolet
Motor Company, later going to New York as assistant to
Mr. Durant. In 1918 he was made assistant to the presi-
dent of the General Motors Corporation.
While at Chevrolet he had shown ability in plant reor-
ganization, now needed at Oldsmobile after the weaknesses
caused by the interruptions and turmoil of the war period
had been revealed by the post-war slump. After the black
year of 1921, which registered a 40 percent drop in out-
put for Oldsmobile, the company resumed its upward march
with a 21,216 production in 1922. In the first twenty-two
234 The Turning Wheel
years of the century Oldsmobile had produced upward of
200,000 cars.
Following the post-war period there was a noticeable
trend toward the "sixes." Oldsmobile had been building six-
cylinder cars since 1908, but this type of automobile was
relatively high-priced, enough so to be out of reach of the
majority of automobile buyers, and "fours" had been Olds-
mobile's dependence in reaching the masses. Work was now
begun on a six-cylinder car to sell below $1,000. The first
model of this light Oldsmobile usix" was introduced in
September, 1923, and Oldsmobile left the four-cylinder field.
In 1926 Oldsmobile engineers designed another six-
cylinder car, which brought a new high production record.
In 1928 Oldsmobile sold more than 86,000 cars and in
1929 more than 100,000, which included the Viking model.
From 1927 to 1929 twelve large buildings were erected and
several additions were made to the Lansing factories. Olds-
mobile brought out its first "straight eight" in 1932.
Olds Motor Works has been one of the chief factors in
the growth of Lansing from 2,000 in 1890 to 79,000
in 1930. Employment rose from 3,700 in 1920 to 7,500 in
1930, the latter number including employees of the Fisher
Body plant, located at the Oldsmobile factory, and devoted
wholly to the construction of Oldsmobile "six" bodies.
Mr. I. J. Reuter succeeded Mr. Hardy as president and
general manager. Mr. Reuter went to Opel in Germany in
October, 1929, returning to Olds in 1932. In October, 1933,
Mr. C. L. McCuen became general manager of Olds Motor
Works with which he had been associated in an engineering
capacity since 1926.
Chapter XVII
GENERAL MOTORS OF CANADA,
LIMITED
G
IENERAL MOTORS OF CANADA, LTD., like many other
organizations in the automobile field, had its beginnings in
the carriage industry. The founder of the business was
Robert McLaughlin, whose father came to Canada from
the British Isles in 1835, and in 1867, tne Year °f Con-
federation of the scattered Canadian provinces, produced
the first McLaughlin carriage at his primitive forge in the
cross-roads village of Enniskillen, Ontario. Transportation
was rudimentary — it was eighteen years before Canada had
a transcontinental railroad. The McLaughlin vehicles there-
fore found a ready market, particularly since they were
built with thoroughness and craftsmanship.
His reputation established, Robert McLaughlin moved
in 1878 to Oshawa, and began making carriages for the
wholesale trade. A destructive fire late in 1899 caused
temporary removal to Gananoque. The next year, the com-
pany reoccupied new and larger premises at Oshawa, which
became the nucleus of the present large and modern plant
in that city.
In the meantime, his two sons — George W., and R. S.
McLaughlin — became associated with their father in the
carriage business which, before it entered the motorized
field, produced over 270,000 horse-drawn vehicles — car-
riages, buggies, and sleighs.
The trend in transportation led to the formation of the
McLaughlin Motor Car Company, Ltd., in 1907, with
235
236 The Turning Wheel
R. S. McLaughlin as president, Oliver Hezzlewood, vice-
president, G. W. McLaughlin, treasurer, and Robert
McLaughlin, the elder, in an advisory capacity. A survey of
the entire automotive industry convinced the new organiza-
tion that Buick was the ideal car to meet Canadian con-
ditions. Thereupon the company made a fifteen-year
contract with Buick Motor Company for sole manufacturing
rights of Buick in Canada. The McLaughlin-Buick before
long became Canada's standard car. At the close of 1914,
ROBERT MCLAUGHLIN
General Motors Corporation owned $500,000 of the cap-
ital stock of the McLaughlin Motor Car Company, Ltd.,
and McLaughlin Carriage Company, Ltd., had $503,000.
The McLaughlins gave up the carriage business in 1915
to make way for Chevrolet Motor Company of Canada,
Ltd. Under them Chevrolet met with instant success in
the Dominion.
On November 8, 1918, the McLaughlin and Canadian
Chevrolet companies were merged into General Motors of
Canada, Ltd., of which R. S. McLaughlin became president
and G. W. McLaughlin, vice-president. The father was no
longer active, but took a keen interest in the new organ-
ization until his death in 1921.
On December 19, 1918, General Motors Corporation
bought the remaining interest in McLaughlin Carriage,
Chevrolet of Canada, and McLaughlin Motor Car com-
panies for 49,000 shares of Common and $550,000 cash.
Capitalization of General Motors of Canada, Ltd., was in-
creased to $10,000,000 soon afterward.
General Motors of Canada, Limited 237
General Motors of Canada, Ltd., is a manufacturing
company, with authorized capital stock of $10,000,000, par
$100, of which $6,940,000 has been issued. Its sales and
service subsidiaries are :
Cadillac Motor Car Company of Canada, Ltd.
Chevrolet Motor Company of Canada, Ltd.
McLaughlin Motor Car Company, Ltd.
Pontiac Motor Company of Canada, Ltd.
Olds Motor Works of Canada, Ltd.
General Motors Products of Canada, Ltd.
Mr. R. S. McLaughlin, now one of the older General
Motors directors in point of service, heads the various sub-
sidiaries of the Canadian company. Mr. McLaughlin was
first elected to the board in 1910, and again in 1918, since
which time he has served continuously.
General Motors Products of Canada, Ltd., is a selling
organization with eight zone offices in the cities of Van-
couver, Calgary, Winnipeg, Regina, Toronto, London,
Montreal, and Moncton. Parts depots are also maintained
in the principal cities, and there are 1,000 strong individual
dealerships in Canada.
General Motors products are financed in the Canadian
market by General Motors Acceptance Corporation, with
headquarters in Toronto, and branch offices in the eight
zone cities mentioned. Insurance service is furnished by
General Exchange Insurance Corporation, also at Toronto.
Manufacturing operations are centered in four cities.
The works at Oshawa are the largest ; having a floor space
of 2,200,000 square feet and a production capacity of 750
cars a day. Employees, at the peak period, numbered 7,000.
The works at Regina, Saskatchewan, were opened in 1928
for assembly of Chevrolet and later, Pontiac. They have a
floor space of 370,000 square feet and a capacity of 30,000
cars a year.
At Walkerville, engines are produced for Buick, Chev-
rolet, Oldsmobile, and Pontiac automobiles and front axles
for Chevrolet, providing employment for as many as 2,000
workers.
238 The Turning Wheel
An associated factory, though independently operated, is
that of the McKinnon Industries unit of General Motors
at St. Catharines, Ontario, where generators, starters, dif-
ferentials, spark plugs and other parts are made.
Domestic shipments of cars from the Oshawa plant
amounted to 9,915 in 1916, and had grown to 22,408 in
1920. The high point for domestic shipments was reached
in 1928 with 75,000 cars. In the seventeen years of pro-
duction from 1916 to 1932, more than 725,000 Canadian-
made General Motors cars were manufactured. During
R. s. MCLAUGHLIN
1932, sales of General Motors of Canada passenger car
lines were 39.3 percent of all the sales in Canada, and com-
mercial cars accounted for 41 percent of all commercial
car sales.
Export shipments from Oshawa have been made to as
many as sixty-five overseas countries in a single year. In
1932 and 1933, Buicks for the British Isles were all shipped
by General Motors of Canada, Ltd. (McLaughlin-Buicks).
Cars are manufactured, not merely assembled, in the
plants of General Motors of Canada, Ltd., even bodies for
most of the lines being made at Oshawa. It has been the
policy of General Motors Corporation to provide as much
employment as possible in the countries where sales oppor-
tunities are enjoyed. Canada is in a remarkable position in
General Motors of Canada, Limited 239
this respect, inasmuch as General Motors cars are built
there almost completely "from the ground up," not simply
put together with parts imported from the United States. In
the early days, strictly speaking, there was very little auto-
mobile manufacturing in Canada, but in recent years there
has been a steady development until today the Canadian
automobile industry may be regarded as a manufacturing
industry in the true sense, with General Motors of Canada,
Ltd., playing an important role. General Motors cars
made in Canada have a high percentage of Canadian con-
tent, to which the Canadian motor-car user reacts very fa-
vorably. Naturally, too, General Motors cars exported from
Canada to other parts of the British Empire in a finished
state are highly British in content, and this also is helpful
in view of the recent emphasis on the Empire slogan "Buy
British."
The evolution from assembling to manufacturing in the
case of General Motors cars in Canada has been accom-
panied by frequent alterations in the tariff as it affects the
Canadian industry. These alterations group themselves into
two or three periods of varying duration.
From 1907 to 1926 the Canadian customs tariff on all
imported automobiles was 35 percent. The degree of pro-
tection offered by this impost was sufficient to give the
Canadian industry a good start. Leading companies in the
United States, including General Motors, established large
plants there for assembling and for such manufacturing as
could then be carried on, in view of the limited supply of
Canadian parts and material. It was during this period that
General Motors built the large Walkerville plant, which is
now a part of General Motors of Canada, Ltd. At first,
this plant supplied some engines and parts of axles. At
present, its contribution to finished Canadian cars is much
larger and the plant has sufficient capacity to supply engines
for Chevrolet, Pontiac, McLaughlin-Buick, and Oldsmobile
in whatever quantities required.
The next alteration in Canadian tariff structure was
downward. In 1926, the customs duty on small cars was
reduced to 20 percent and that on large cars to 27.5 per-
cent. At the same time a "drawback" of 25 percent was
240 The Turning Wheel
allowed on material to be used for cars of 40 percent Can-
adian manufacture, and in the following year this "draw-
back" was only to apply on cars of 50 percent Canadian
manufacture. The reduction from 35 percent to 20 percent
duty was made effective in the face of general protests from
almost the whole Canadian automotive industry, and the
figures showing imports of small cars for the next three
years were striking enough to justify those objections. Im-
ports in 1926 were 28,000 cars; in 1927 they reached
36,000; the following year they totalled 47,000; and in
1929, 44,000.
The ultimate effect on manufacturing process of this par-
ticular tariff period was to increase the number of Canadian
parts and the Canadian content of finished cars. At first it
was difficult with the complete factory output to qualify for
the customs "drawback" on cars of 50 percent Canadian
content, but before many years had passed this was easily
accomplished. With the idea of providing the entire motor
trade of Canada, including General Motors, with necessary
parts, General Motors Corporation in 1929 purchased
McKinnon Industries at St. Catharines, Ontario, which, in-
terestingly enough, was a survival of the old-time carriage
trade, as was the case with so many existing motor-car
industries. At that time, McKinnon Industries was con-
verted to the manufacture of differentials and rear axles.
Development was very rapid, and many other parts have
since been added, including steering gears, shock absorbers,
and ignition parts. Recently, also, the making of spark
plugs for the trade and for General Motors cars was com-
menced under the direction of the AC Spark Plug Company.
In addition to supplying the whole Canadian trade with
many motor parts, this plant also produces the unit for the
Canadian-built Frigidaire refrigerator.
Entering a more recent period of tariff history, it is
noticed that the motor-car schedule was completely rewrit-
ten in 1930. In the case of small cars, the customs duty was
set at 20 percent (up to $1,200 — trucks included) ; on cars
from $1,200 to $2,100 duty was 30 percent; and on cars
from $2,100 up, the duty was 40 percent. Moreover, the
General Motors of Canada, Limited 241
"drawback" was eliminated on a specified list of parts, and
was made 25 percent for most of the remaining parts and
60 percent on a very restricted list in the case of cars of 50
percent Canadian content. A noticeable effect of this change
was a reduction in the number of car imports. While the
change came at a time when sales generally were decreasing
heavily, yet the reduction in the number of imports was
more than proportionate.
Imports between 1930 and 1931 declined much more
heavily than did Canadian production. In 1931, another cus-
toms duty alteration took place. On imported cars the valu-
ation for duty was fixed at a flat 20 percent discount from
the list price. Inasmuch as discounts on many cars had been
claimed at a much higher figure, the effect of the change
was to increase the amount of duty paid on most cars. At
this same time the importation of used cars was prohibited,
except in a few cases, such as settlers bringing in effects.
The immediate result was a further decline in all car im-
ports. The year 1932 saw a reduction of more than 80
percent in units imported, while Canadian production at the
same time declined only 26 percent.
In addition to customs duties, there has been, since the
war years, an excise tax of varying rates on cars either
imported or made in Canada. The excise tax until 1926 was
5 percent on cars not more than $1,200, and 10 percent on
cars valued in excess of $1,200. In 1926 this was changed,
to allow complete exemption from the excise tax in the case
of cars valued at not more than $1,200, if they were 40
percent Canadian content (50 percent Canadian content in
1927 and thereafter). The excise tax was also eliminated in
the case of cars imported from Great Britain if they were
of similar British content. The same rates of excise tax
apply at the present time.
The final outcome of this evolution in tariffs and manu-
facturing is that General Motors cars in Canada are very
largely Canadian-built. Examining the Chevrolet automo-
bile, for example, it is found that all parts of the Dominion
contribute. Chassis springs are purchased from firms which
make them at Gananoque, Ontario, and Oshawa. Front
axles are manufactured by the General Motors plant at
242 The Turning Wheel
Walkerville, forgings being supplied by a Canadian com-
pany in the same city. Third member assemblies, including
differential, are made by McKinnon Industries at St. Cath-
arines. The body is completely built at Oshawa. Since the
Oshawa factory, from its earliest days, had an extensive
woodworking establishment for manufacturing bodies, no
Canadian division of the Fisher Body Corporation was
formed. Instead, the operation was amalgamated with the
general manufacturing. All General Motors of Canada
cars, of course, bear the Fisher insignia. Engines are built
at Walkerville and radiators at Oshawa, material in both
cases being supplied by Canadian companies. Factories in
many cities supply castings, bumpers, glass, wiring, paint,
trim, hardware, and wheels.
Evolving to its present proportions under a Canadian
management of long standing, which has coped successfully
with manufacturing and sales problems rendered more
intricate by tariff changes, General Motors of Canada
stands today as one of the leading industries of the great
Dominion.
Chapter XVIII
GENERAL MOTORS ACROSS THE SEAS
I
N THE early 'nineties R. E. Olds, as previously related,
made the first sale of an American automobile for export, a
chance sale resulting from a description of the Olds steamer
published in the Scientific American of May 21, 1892. Since
then the overseas trade in motor cars has become a leading
factor in America's foreign commerce.
World trade in General Motors products is a business of
great complexity and extent. The Overseas Operations are
divided into three major divisions, Vauxhall Motors, Ltd.,
which manufactures and sells its products in the British
Isles; Adam Opel, A. G., which manufactures and sells its
products in Germany; and the General Motors Export di-
vision, which is the assembling and merchandising organiza-
tion responsible for the distribution of all products from
whatever source in the world markets outside of the United
States, Canada, Germany, and the British Isles.
The Export division consists of four great territorial
regions, each under the charge of a regional director, who is
responsible to the general manager in New York. These
major territories under the control of the regional directors
are:
Europe, with six plants located in France, Belgium,
Sweden, Denmark, Spain, and Egypt.
South America and South Africa, with three plants, in
Brazil, Argentina, and Cape Colony, South Africa.
243
244 The Turning Wheel
Australasia, with assembly plants and a complete body
manufacturing plant in Australia and an assembly
plant in New Zealand.
Far East, with assembly plants in Japan, India, and Java.
The regional directors of those vast areas maintain
headquarters at the home office but spend most of their
time traveling far and wide over their territories.
But a goodly portion of the planet lies outside of these
wide jurisdictions, and the trade originating there is
handled by General Motors Export Company from New
York City. This far-flung task embraces such distant and
diverse areas as China, Mexico, all of Central and South
America except Brazil, Uruguay, and Argentina, vast
sections of Africa, and also the Caribbean and Pacific
Islands.
The sun never sets on General Motors. Its Japanese
workmen in Osaka are putting on their sandals to go to
work while its South African workmen are starting home-
ward from the factory at Port Elizabeth. Its salesmen know
what it is to compete with the indigenous transport — on
wheels and otherwise — some of it most unusual, as exampled
by the carabao (water buffalo) pulling a sled in Malaysia;
horse-drawn carts with seven-foot wheels in Argentina;
coolie-carried chairs in a Chinese bridal party procession;
camel trains of the Sahara and camel-drawn wagons loaded
with wool in Australia. In these globe-spanning operations
and contacts General Motors representatives have met all
manner of men and all varieties of problems in manage-
ment, transportation, and human nature.
This peaceful penetration of the near and remote parts
of the wrorld has appealed to men willing to go forth, adapt
themselves, and carry their message with the zeal and con-
viction of the missionary of old. In so doing, they have come
upon all the colorful scenes of this earth from the narrow,
crooked lanes of Java lined with thatched huts, to over-
crowded tropical harbors and the long reaches of desert
and river, each environment calling upon their ingenuity,
resources of patience, good-will, and perseverance. Their
lot is one of hard work, against a background of novelty,
General Motors Across the Seas 245
with always the duty of learning the manners and customs
of each foreign field and tactfully seeking to understand
its people and their needs.
The life appeals to adventurous men who are at home
anywhere. There are General Motors families who answer
a call to move with little more concern than if they were
moving to the next block. One such family contains four
children, each born in a different country, each speaking the
language of his or her early environment better than Eng-
lish. All over the world a mobile force continues an unre-
mitting drive for sales.
This vast organization began humbly enough on June 19,
1911, when the General Motors Export Company was
incorporated in Michigan for $10,000, under the banker
management then in control of General Motors. The presi-
dent of General Motors Company, Mr. Thomas Neal, be-
came its president. Export started operations with a staff
of only three persons, but, even so, it was in a sense the
most complete expression of General Motors because it
was the first selling organization in which all the various
General Motors units joined to carry a common objective.
Hitherto, foreign sales, chiefly of Buicks and Cadillacs, had
been made by the divisions' staffs acting independently;
henceforth for many years all foreign trade would pass
through the Export Company. During Mr. Neal's presi-
dency and up to 1916, Mr. O. A. Bennett was the guiding
spirit of Export. Mr. Bennett became president in 1915.
At first the Company pushed foreign sales along mail-
order lines and made no really intensive effort to develop
sustained activities in foreign selling. Capital was increased
to $100,000 in 1912. Soon afterward Export brought its
more important activities to the natural seat of foreign
commerce, New York City, where sales for the entire world
were handled by a staff of fifteen or sixteen people working
in a three-room office on Park Avenue.
World War needs developed large orders, but the entry
of America so reduced production that the Export Com-
pany found itself with a limited allotment of cars at its dis-
posal, which it had to allocate as judiciously as possible
among its distributors throughout the world.
246 The Turning Wheel
When Mr. Bennett resigned the presidency because of ill
health in 1916 (he died in 1917), he was succeeded by
R. H. "Trainload" Collins, the vigorous sales manager of
Buick. Mr. Collins held the office until Mr. J. A. Haskell
became president to remain at the helm until 1922. Head-
quarters were moved to n Broadway in 1917, and to 224
West 57th Street in 1918.
On June 27, 1918, General Motors Export was combined
with General Motors (Europe), Ltd., with a capital of
$212,932.75. General Motors (Europe), Ltd., had begun
life in 1909 as Bedford Motors, Ltd., of London, England,
making Bedford Buicks, the chassis being Buick. It became
General Motors (Europe), Ltd., in 1912, but down to 1914
handled only Buicks. Reference will be made later to Gen-
eral Motors, Ltd., London, which succeeded to the Eng-
lish representation, and imported cars and trucks into Eng-
land, independent of the Export Company.
What may be called the modern development of General
Motors Export dates from the end of the World War,
when demand for rapid transport rose rapidly. Export sales
advanced from 6,004 units in 1918 to 14,665 in 1919. In
1919, Overseas Motor Service Corporation was organized
to service and distribute motor-car parts and accessories in
the export market. These include - not only well known
General Motors products such as AC spark plugs, AC
speedometers, Delco products (except in the British Isles;
Hyatt also excepted from Continental Europe), but also
parts and accessories of other makers.
Up to 1920 the backbone of the overseas business was
Buick. Plans were made to give it wider distribution and
push its sale. The Export Company, now due for permanent
expansion overseas, made studies of the export organiza-
tions of several other large American concerns doing busi-
ness abroad. It also established a training school in the
Buick Building, 1737 Broadway, to provide intensive train-
ing for Company employees who were to serve in the over-
seas field, and to aid those in the home office to improve
themselves in their knowledge of the conduct of the Com-
pany's business. In 1920 unit sales reached a volume of
General Motors Across the Seas 247
29,772 (Export 1927 annual report). Need for more room
led the Company to move its offices from 224 West 57th
Street to the Wurlitzer Building at 120 West 42nd Street.
In 1921 Mr. J. D. Mooney became a vice-president of
the Export Company. The next year he succeeded
Mr. Haskell as president. The new president had been
general manager of the Remy Electric Company, another
General Motors division. The management outlined an in-
tensive sales campaign, the fruits of which appeared in the
years of the "Golden 'Twenties." For this campaign six
sales divisions were set up: Caribbean, South American,
Australian, African, European, and Far Eastern.
While the United States and Canada absorbed cars at a
rate which demanded constant expansion at home, other
fields could have only the attention they insisted on having;
the real effort toward intensive cultivation of these fields
followed shortly after the post-war slump of 1920-21
when the domestic market failed to absorb its customary
volume of cars.
By 1922 the Company employed 300 persons, including
field men, but still the Export division had not taken on
definite shape. In that year the Export Company returned
to the General Motors Building at 224 West 57th Street.
In 1923 the Corporation began to advertise in overseas
motor and other publications, reaching the public in as
many as fifty-five publications in sixteen different countries.
The senior field personnel was increased by one third in the
same year, and new zone offices continued to be added,
situated in strategic positions to take immediate advantage
of any improvement in political and economic conditions.
Outside of the United Kingdom and Ireland, which was
controlled directly by General Motors, Ltd., with head-
quarters in London, General Motors overseas offices were
located in Paris, Soerabaia, Calcutta, Manila, Melbourne,
Sydney, Johannesburg, Sao Paulo, Copenhagen, Bombay,
Shanghai, Honolulu, Wellington, Madrid, Mexico City,
and Buenos Aires. General Motors cars were being sold in
125 countries, giving coverage almost world-wide. General
Motors World, organ of the Overseas Group, reports that
248 The Turning Wheel
leading markets in 1923, the first of a series of record-
breaking years, were Australia, United Kingdom, Mexico,
Sweden, Argentina, Spain, Cuba, Belgium, and Japan.
Chevrolet, steadily making a better reputation for itself,
was now a factor in the low-priced field, and it seemed
advantageous to assemble Chevrolets abroad. Accordingly,
in 1924, plants were established in London and Copen-
hagen. The London venture soon came under the handicap
of a horsepower tax. However, as there seemed to be a
place for a satisfactory truck of the Chevrolet model, com-
mercial body-building was started at General Motors, Ltd.
The trend in the British Isles was toward a smaller, lower-
powered and lower-priced product. The search for a satis-
factory passenger car to supplement the truck led to the
Vauxhall purchase, completed November, 1925.
Copenhagen, on the other hand, operated successfully
from the start and furnished inspiration for assembly activi-
ties elsewhere. The original Company of 1911, primarily
a sales company, and known by its old name of General
Motors Export Company, still functions as such, finding its
territory in those fields not covered by the self-contained,
locally-operated organizations. As an operating concern, the
Export Company has a managing director and a sales or-
ganization and a place in line with other operating compan-
ies of the overseas group. But in general, reference to the
Export Company herein means the corporate organization
rather than the operating one. More will be told about the
plan of organization.
The focal points of General Motors assembly, manu-
facturing, warehousing, and distribution overseas are:
New York City, New York; Luton, London, and Birming-
ham, England; Copenhagen, Denmark; Stockholm, Sweden;
Antwerp, Belgium; Riisselsheim and Berlin, Germany;
Puteaux, France; Barcelona, Spain; Alexandria, Egypt;
Buenos Aires, Argentina; Sao Paulo, Brazil; Montevideo,
Uruguay; Port Elizabeth, South Africa; Woodville, Aus-
tralia; Wellington, New Zealand; Osaka, Japan; Batavia,
Java, D. E. I.; Bombay, India.
The assembly plants at Buenos Aires and Sao Paulo date
from 1925, also that at Antwerp, Belgium, the seat of
General Motors Across the Seas 249
General Motors Continental. General Motors assembly
operations in Spain began in 1925 with a plant at Malaga,
operations being later transferred to Madrid and recently
to Barcelona.
Outside of the Export division staff, but part of the
General Motors Overseas Operations group under Mr.
Mooney's jurisdiction, appeared at this time General
Motors, Ltd., London, England, whose beginnings have
been previously noted. The plant at Hendon, eight miles
from London, was expanded in 1925. A conveyor system
took the crates arriving from the Oshawa, Canada, plant
and turned out the car ready for road tests and distribu-
tion in the United Kingdom. The commercial body-building
plant heretofore noted began operations in 1925, and
straightway proved itself one of the most successful of
the overseas operations.
In 1929 General Motors, Ltd., took over the selling and
general distribution of all Vauxhall cars. The arrangement
was continued until 1932, at which time all products of
Vauxhall Motors, Ltd., were sold, as well as manufactured,
by the latter company. In 1932 Hendon had completely re-
versed its early procedure; cranes that once swung crates
inward now swung them outward, so that instead of being
an import, unboxing plant it became an export, boxing plant
for the Vauxhall products which had been developed in the
meantime.
Vauxhall Motors, Ltd., manufactures the Vauxhall, an
English car of long-established reputation, with plant and
offices at Luton; also the Bedford truck, an outgrowth of
the Chevrolet truck activities in England, the change in
name having occurred in 1931. Vauxhall then employed
2,000 men and made 1,700 cars a year, with a possible
production estimated at 25,000 a year. The Corporation's
initial transaction in Vauxhall, requiring £510,000, was con-
summated November 24, 1925. The Corporation has since
enlarged its interest, and now owns a substantial propor-
tion of the shares of Vauxhall. Three new directors repre-
senting General Motors were added to the board. The man-
agement and personnel remained British, while Vauxhall
250 The Turning Wheel
gained capital, a selling organization, and the benefit of re-
search. More recently Vauxhall began to manufacture low-
priced models of low horsepower to meet special English
needs. Sales activities of General Motors, Ltd., have been
taken over by Vauxhall.
In the German development were two concerns, known as
General Motors, G.m.b.H., and Adam Opel, A.G. During
the period of German import restrictions, the former com-
pany acted as a sales office placing its orders with the Ex-
port Company or with either General Motors Continental
at Antwerp, or International at Copenhagen. When the
German import restrictions on motor cars were lifted, in
1925, a warehouse was secured at Hamburg, and a manu-
facturing base opened in Berlin. In April, 1926, the first
Chevrolet truck came out of the assembly. This expansion
was accomplished in the fact of discouraging conditions in
Germany which led to a severe crisis the following winter.
Adam Opel, A.G., represents the largest single invest-
ment of General Motors overseas, having grown to its
present proportions through a long history of diversified
manufacture. The Opel workshop was founded at Riissels-
heim, Germany, in 1862, for the manufacture of sewing
machines. Opel began to build wine-making machinery in
1883, high-wheeled bicycles in 1886, low-wheeled bicycles
in 1892, passenger motor cars in 1899, motorcycles in 1901,
and motor trucks in 1907.
In developing their plant the Opels drew on American
experience. Wilhelm von Opel, the present head of the
works, studied advanced production methods in the United
States in 1909 and on his return to Russelsheim directed a
tremendous plant expansion. Fire destroyed the works in
1911, leading to the end of sewing machine production.
Larger plants were soon erected and by 1912, 4,500 per-
sons were at work in Opel factories. In 1924, the conveyor
system of production was installed, following the best
American practice. Another extension occurred in 1926
when Opel reached a production of 43,500 cars.
As an industrial layout, Opel approaches Krupp's in
completeness. Its equipment includes 7,000 working ma-
chines and automatics, more than seven miles of standard
General Motors Across the Seas 251
gauge railroad, six locomotives and 1,800 tip cars, 30 lift-
trucks on eighteen transport lines, 700 loading platforms,
40 elevators, and 30 cranes.
From 1926 to 1929, Opel enlarged its Russelsheim plant
by more than a million square feet to a total area of more
Opel car in African exploration — Schomburgk Expedition
than 7,500,000 square feet, with a daily capacity of 500
motor cars and trucks and 3,000 bicycles. Shortly after
General Motors acquired its interest in Opel, in 1929,
"Blitz" was adopted as the trade-name for Opel trucks.
Export sales for all Opel automotive products are handled
by the General Motors Export division.
252 The Turning Wheel
Opel is unique in the Corporation in total amount of car
fabricated in one plant : body, radiator, shock absorbers,
fuel pump, clutch, valves^ and universal joint. Exports in
1932 were only 4 percent below those of the year preced-
ing, and Opel cars accounted for slightly more than 68 per-
cent of German car exports. Geheimrat Wilhelm von Opel
is chairman of the board of Adam Opel, A.G.
While the Export Company was distributing cars in Aus-
tralia, a new tariff of nearly three hundred dollars on every
car body imported pushed prices of General Motors cars
skyward. Faced with a complete loss of its Australian trade,
the Export Company made a contract with Holden's Motor
Body Builders, Ltd., which already did the bulk of body-
building for the Commonwealth, besides handling a large
part of General Motors' requirements, practically all body
work being done by hand. Cooperation between General
Motors and Holden's brought forth a new plant, con-
tiguous to the existing one at Woodville. In the milling de-
partment a progressive line for all mill operations was set
up, including Linderman and other modern machines new
to the Commonwealth. The General Motors staff, in an
emergency, built a hydraulic press, obviating the former
method of shaping body panels by hand. These and other
machines, also wood kilns, nickel-plating and Duco depart-
ments, were beyond the experience of workers there, and
it took some persuasion to change their attitude regarding
labor-saving devices. Also, they had to be instructed in the
use of the new machinery. Results were highly beneficial.
Before the end of 1925 several thousand employees were
added for the production of General Motors bodies ex-
clusively. In this General Motors-Holden's enterprise the
Corporation acquired a majority of the Common stock
in 1931.
The expansion of overseas business depended on the
coordination of the Export group and other Corporation
groups, many of which had goods to sell in that market.
Field personnel gradually imbued foreign dealers with the
spirit of American merchandising methods, adopting the
policy of "Volume — turnover — service." While the total
number of automobiles a given territory could absorb in a
General Motors Across the Seas 253
year was a matter of economics, "the percentage of General
Motors products to that total was a question of representa-
tion and salesmanship."
A world survey of the automotive industry was under-
taken in 1925, with three main questions to be answered:
Where were the motor cars of the world to be found?
How many were there? Who sold them? Through 1926,
the spotting of other assembly plants and warehouses on
the world map continued. The plants in Australia — at Bris-
bane, Sydney, Melbourne, Adelaide, and Perth — date from
this time, also those at Wellington, New Zealand, and Port
Elizabeth, South Africa.
These formative years reveal some of the motives actu-
ating the Corporation in extending its overseas interests
and in creating its assembly plant structures. At first, of
course, it had an eye to savings in freight and duty. Other
advantages made themselves felt in time and proved of no
less importance. There was the advantage of being able to
ship cars and trucks abroad at a rate not possible under
the old distributor system: heavy consignments could be
taken, delivered, and financed at the points of distribu-
tion as part of ordinary procedure. Another advantage en-
tered with the invention and development of Duco, by which
it became possible for assembly plants to finish their own
bodies, with reference to local demands in color, finish, and
trimming.
At first the Color division of the Export Company con-
fined its activities to complete cars being shipped abroad
(Single Unit Packing) ; then the assembly plants took it up;
at length the Color division took over the work of the color
program.
Selection of optional colors for each model of car is made
and finalized six months in advance of any color change
becoming effective in overseas plants. Wide tolerance in
colors is permitted, but those are selected which are funda-
mentally correct from the standpoint of harmony and good
taste, and which in addition meet local preferences. The
latter are many and important. Red is taboo in some coun-
tries because of its Bolshevist connotation. In Japan
maroon cannot be used, because it is the color of the
254 The Turning Wheel
Imperial Household, and in China yellow is taboo because
it signifies mourning for death.
Until 1925, a financial service was available to overseas
distributors generally from the General Motors Acceptance
Corporation only through the Foreign Department located
in New York City and, in the British Isles, through the
London Branch established in 1920.
In 1925, at Antwerp and Copenhagen, General Motors
Acceptance Corporation began the establishment of
branches in foreign fields to conduct a financing service for
overseas distributors and dealers in General Motors
products and also their retail purchasers. This service, so
valuable to the Export organization, has since been ex-
panded to include the following General Motors Accept-
ance Corporation branch offices: Alexandria, Egypt; Ba-
tavia, Java, D.E.I.; Bombay, India; Buenos Aires, Argen-
tina; Honolulu, Hawaii; Osaka, Japan; San Juan, Porto
Rico; South Melbourne, Australia; Wellington, New Zea-
land.- In addition to the above direct branch offices, sub-
sidiary corporations have been organized to offer similar
services at: Copenhagen by General Motors Acceptance
Corporation, Continental; Mexico City, Mexico, by Gen-
eral Motors Acceptance Corporation de Mexico, S.A.;
Russelsheim, Germany, by Allgemeine Finanzierungs Ge-
sellschaft m.b.H. ; Sao Paulo, Brazil, by General Motors
Acceptance Corporation, South America ; London, by Vaux-
hall and General Finance Corporation, Limited; Port Eliza-
beth, S.A., by General Motors Acceptance Corporation of
Delaware.
Effective as of February i, 1926, a definite plan of organ-
ization and management for the Export group of General
Motors was adopted, on the principle of staff and line
control. While there had been previous charting of activi-
ties, necessarily rapid expansion had precluded any con-
tinuous set-up clearly revealing inter-relations, lines of
contact, and division of authority. The Export group had
taken on four general functions : manufacture, sales, supply,
and finance, for each of which a departmental manager was
now appointed. The president of the Export Company was
given charge of all operations of the Export division as well
General Motors Across the Seas 255
as the manufacturing operations; on him was placed re-
sponsibility for the entire Overseas Operations group to the
Corporation, of which he is a vice-president. In general this
relationship still holds. The vice-president of the Export
Company who served as its general manager was designated
also as general manager of the entire Export division (not
including the manufacturing activities in Germany and
England). To him the four departmental vice-presidents of
the functions stated above look for authority, each becoming
responsible for the control and development of his particular
function in all operating units throughout the group. The
respective operating units were placed under managing
directors directly responsible to their regional directors,
who in turn are responsible to the general manager of the
Export division in New York. At Opel and Vauxhall, each
self-contained in a single territory, no such far-flung world
organization exists, but the functional set-up internally is
practically identical. The General Manager of each of these
three major operating divisions — the Opel, the Vauxhall,
and the Export division — reports to the president of Gen-
eral Motors Export Company, who is also vice-president of
General Motors Corporation in change of overseas oper-
ations.
By the end of 1926 General Motors overseas had rounded
itself out. The situation was then outlined as follows:
It becomes quite apparent that we have come, for 1927, to the next
phase of our operation, for we are faced very definitely with the
necessity of consolidating the advances we have made, and of
developing the machinery we have set up to the degree of efficiency
that will bring the permanent result we are seeking. ... As a
group, we have just about reached the limits of our growth; few
markets of worthwhile potentiality are now left without individual
companies, largely self-controlled, installed on the ground to carry
the tremendous resources of General Motors out directly to the
retail dealer and the public. We can no longer look for the impetus
to increase in volume that the creation of a new assembly plant
provides. We have established our line organization on practically
every battle front. Any growth, any expansion hereafter, must
come from within these operating companies, and as a direct result
of their increased activity. . . .
256 The Turning Wheel
This crystallizes directly to a definition of our objective in 1927:
"Ratio to total American volume, return on investment, and car
inventory turnover."
Wherever General Motors cars go, other benefits go in
their turn. Group life insurance is carried on all American
overseas employees of the Corporation. General Motors
Acceptance Corporation participated in the financing of
nearly 50 percent of the Export division's 1926 volume,
employing one hundred workers solely on overseas activi-
ties. Its wholesale and retail plans of financing were in
operation in fifteen countries, with nine other countries
added in 1927.
The year 1927 saw assembly manufacturing started at
Batavia in Java and Osaka in Japan, followed soon after,
early in 1928, at Warsaw, Bombay, and Stockholm. The
three South American plants in Brazil, Uruguay, and
Argentina were placed in communication with one another
by radio. In the development of the line and staff organiza-
tion in 1927, the Export Company, as an operating unit,
was put on the same basis as other individual plants in the
Export division, although it remained the source from
which the officers and directors derived their corporate
status.
All through this period advertising has been pushed by
methods well known at home and by others keyed to char-
acteristics of foreign publics and especially to their degree of
motor-mindedness. Motion-picture films are effectively used.
The automobile show is one of the main reliances for put-
ting General Motors products before the eyes of populous
centers; the one at Brussels always constitutes a main event
in Continental's advertising program. Sao Paulo, which is
the third largest city in South America, was treated to a
special General Motors exhibition, which proved successful
as a result of painstaking preliminary and follow-up ad-
vertising, although, as pointed out in General Motors
World, March, 1927, previous shows at Sao Paulo and Rio
de Janeiro had not been productive of sales. This show suc-
ceeded in bringing the closed car into favor with the
Brazilians is never before. Europeans, Asiatics, and South
General Motors Across the Seas 257
Americans have developed as keen an appetite for auto-
mobile shows as have North Americans.
Overseas the "show" frequently takes the form of a
caravan. Local advertising precedes the appearance of the
fleet of cars and trucks at the various points scheduled. To
the inhabitants of undeveloped countries perhaps the most
exciting of these are the caravans organized to push their
way into new or partially exploited territories. Cavalcades
of General Motors cars, gayly decorated, start from Ant-
werp, Copenhagen, Osaka, or Melbourne, or some other
base, for a long tour of the hinterland. They carry, in addi-
tion to service men and electricians, show troupes, stage
and motion-picture equipment, loud speakers, field kitchens,
and cafeterias. They are really sales and advertising expedi-
tions, painstakingly equipped to maintain themselves in the
field and to entertain large audiences gathered with the co-
operation of local dealers.
Perhaps the most imposing cavalcade was that which
started from New York to show the new v-i6 Cadillac to
Europe, a feature of the journey being the ceremonial
Cadillac visit paid to the ancient seat of the Cadillac family
in France. In Palestine and other Near East areas the motor
cavalcade has been especially effective in bringing scat-
tered dealers into touch with new models and sales ideas.
Impressive endurance runs have been made by General
Motors cars for the same purpose, the most famous one
being the Cape-to-Cairo run by Chevrolet. After crossing
Africa from south to north, this sturdy car went on across
Europe to Stockholm, welcomed all along the line and visit-
ing all the principal General Motors centers. Chevrolet, of
course, is the great volume producer in the export field as
in the home market.
Other special features of export publicity, such as the
round-the-world trips of Buick and Frigidaire, have united
the whole export organization in synchronized publicity
campaigns on an international scale.
Direct-mail advertising is a method used by the Export
company extensively, the sales organization in New York
serving those countries not covered by assembly plants. In
some parts of the world it may be necessary to begin a
258 The Turning Wheel
sales campaign by offering proof that the Corporation
actually exists and makes cars that can be bought locally.
Witness the experience of a sales representative :
I had thought, previous to going to West Africa, that we were so
large and important that we must be universally known. Therefore
it was a bit of a shock to find that many people were in complete
ignorance of our products. To sell these people the idea of General
Motors as a great and unique institution was my primary job and
I found that after telling them about our size and strength, our
multifarious manufacturing, sales and financing activities, showing
them pictures of the Proving Ground and Research Laboratories,
it was very much easier to develop an interest in the actual selling
of our cars and trucks.
While publicity is as much a part of a selling campaign
abroad as at home, objectionable propaganda is taboo. The
following incident may be taken as an indication of how
General Motors adapts itself in a foreign country to custom
and tradition. In 1927 General Motors Japan took over
premises at Osaka, where its predecessors in business had
established a Shinto shrine. Though there was no obligation
to do so, the company restored it to use and now maintains
it. Each year a ritual service is held and the mother temple
has named the shrine, "The White Chrysanthemum."
By May 2, 1927, the home offices were finally quartered
in the General Motors Building at 1775 Broadway. The
goal set for 1927 overseas operations was reached, and a
policy of plant expansion began. It was stated at that time
that uwe shall have to work definitely toward identifying
ourselves with each market." Further explained, General
Motors as an institution had already assumed an interna-
tional character.
In many countries General Motors is coming to be looked upon as an
integral part of the basic industrial life of those countries. There
is not one American in the entire organization of Vauxhall Motors,
Ltd., in London. The daily business in the office in Osaka is con-
ducted by Japanese, and the native workmen are carrying on their
jobs under native foremen. The tendency to employ local per-
sonnel, and to promote this personnel into a position of responsi-
bility and authority as fast as it qualifies, is present everywhere. It
General Motors Across the Seas 259
is definitely General Motors' policy to award the job to the man
who merits it, whatever his nationality.
Altogether there were nineteen manufacturing and assem-
bly plants in the Export division at the close of 1928, in
which year the employees of the Company averaged
eighteen thousand in number.
General Motors Export volume was greater than the volume of any
group of export products going out from the United States with
three exceptions. . . . The General Motors Export division also
did a greater volume of business abroad than the Corporation did
domestically seven years before. General Motors had become the
biggest automotive concern doing business in Europe.
Sales abroad of American-source products by the export
organizations of General Motors for a second four years of
the modern development were :
CARS AND TRUCKS
Year Number Value
1926 118,791 $98,156,088
1927 193,830 171,991,251
1928 282,157 252,152,284
1929 256,721 243,046,031
Since many overseas representatives usually come back
to the United States in the spring, a regional conference of
the Overseas group, attended by representatives from
twenty-eight different countries, was held at Shawnee-on-
the-Delaware, Pennsylvania, May 22—30, 1929.
Before 1929 closed, the story of another pioneering effort
came out of the Near East. There are twenty languages in
General Motors Near East territory. The Parts division
translated the Chevrolet Parts Book into each of the chief
languages used in its territory: French, Italian, Arabic, and
Turkish. The Turkish and the Arabic versions represented
a monumental task. Arabic lacked an automobile vocabu-
lary or even the root words upon which to build. The
translator's book was praised by the Arabic press and found
favor with government officials, such as those of the
Egyptian customs.
260 The Turning Wheel
Constructive helps to overseas dealers in General Motors
products are extended in three different forms: Service
School, Dealer Accounting, and Retail Sales School. When
dealers failed to send their service men to the plant school,
the Rolling Service School was established and first took
the field on wheels into Brazil in 1926. By 1930 most of the
Overseas group had established similar schools on wheels.
General Motors5 stake in world trade had become
enormous by 1928, when its sales overseas amounted to 15.6
percent of its total business. General Motors' share of all
American and Canadian motor-car business abroad was
12.4 percent in 1922, 24.3 percent in 1926, and 47.1 per-
cent in 1928.
The peak passed. Danger signals began to fly abroad in
1929. By July the decline in the sales of automobiles abroad
set in. This was to continue steadily through 1932, and
for the first two months of 1933. This decline was accel-
erated in the latter half of 1929 by the fall of international
exchange and increasing disruption of world trade. In the
Export division's affairs, those markets termed neutral, i.e.,
those where there was no major car manufacturing, as there
was in England, France, Germany, and Italy, felt the ad-
verse effects most severely, in reduced buying power as well
as in increased competition from other than American
products.
The sales account of Export in these three years of de-
cline shows:
CARS AND TRUCKS
Year Number Value
1930 164,112 $155,728,304
1931 125,606 110,525,817
1932 77,159 64,722,593
The attainment of these relatively satisfactory sales in
1930 to 1932 can be attributed to a substantial increase in
the sales of the Corporation's German- and English-source
product in the world markets. In 1930, the first year in
which these sales were included, they accounted for 20.7
percent of the Corporation's overseas volume, in 1931 this
General Motors Across the Seas 261
ratio was increased to 31.0 percent and further increased
in 1932 to 47.7 percent.
As early as 1926, difficulties — some already noted —
hindered expansion of the American export business. These
might take the form of political alliances and loans, import
quotas, and rising tariffs. The United States failed to im-
port in volume sufficient to permit other countries to pay
for our exports, and when American investors ceased to
take foreign loans, a decided swing away from American
goods began. By 1929 this trend threatened to become an
avalanche which the Overseas Operations found it could
meet best by capitalizing even more heavily on the manu-
facturing sources it possessed in Europe to protect its
investment of approximately $68,000,000 in overseas busi-
ness and to safeguard its distribution system with its thou-
sands of employees and its 1,800 dealers — in the event that
its American cars, for one reason or another, should be shut
out of these consumer markets.
There was also another good reason for foreign manu-
facturing. While American cars were being improved in
quality, they were also being increased in size and weight,
in contrast with European evolution toward small and light
types, more economical to own and operate in countries
where gasoline is expensive, and horsepower taxes are high.
Differences in the tastes of foreign consumers could be
satisfied by a flexibility of production not possible at home.
Better geographic relation to some of the major volume
markets also had its influence.
These considerations had led the Corporation to become
interested in Great Britain as a manufacturing source, not
only because the British Isles afforded an important and
stable market in themselves, but also because the threat
against American cars in foreign export fields, especially
in Australasia, worked to favor British products. If the
Corporation were handicapped in those fields, its invest-
ment would suffer. German manufacture was equally ad-
vantageous, both for the Reich and for many sections of
Continental Europe.
With the arrested growth of American-source volume
creating many investment problems, plans were made for a
262 The Turning Wheel
realignment of the Corporation's world-wide distributing
structure. Reduced to a sentence, the problem resolved itself
largely into one of "earning on the investment made by
selling, in each market and from each source, the kind of
cars the people in those markets want and can afford to
buy." Such a policy demanded, in order to achieve the
proper balance, as keen an interest in Vauxhall and Opel
as in any of its American manufacturing companies.
Handicaps against American-made cars abroad reduced
America's share of overseas sales from 52 percent in 1929
to 21 percent in 1932. In his report for the Overseas Opera-
tions group for 1932, the president commented as follows
on the changing situation:
The swing . . . represents a change in the popular demand for
motor cars which is of profound significance to General Motors
and to all companies engaged in international trade. Its causes
. . . include the basic economic disadvantages which confront
America in her present international economy; the growing senti-
ment of nationalism; the increased duty advantages and, in some
cases, exchange advantages, which have come to prevail in favor
of foreign products; the rather normal trend toward a smaller and
more cheaply operated type of car arising out of the depression ;
and most important of all, the more serious effects of the economic
depression itself upon those "Neutral markets" throughout the
world where the American car has always been strongest, as com-
pared with the effects in the manufacturing markets, where the
American car has never, actually, accounted for a very considerable
proportion of the business.
With English and German production sources as its de-
fence, General Motors was able to "soften the drop" in the
total volume, and in the later months of 1932 these sources,
including the products consumed domestically in England
and Germany, were exceeding the American-source volume
in General Motors' total overseas trade. Despite these bul-
warks, however, General Motors unit sales abroad fell 38
percent below those for the preceding year, but at a decreas-
ing rate as 1932 went along.
Of the total American-source business General Motors
held its own in 1932 with 33.9 percent, while its German
General Motors Across the Seas 263
and English sources as against the volume from all foreign
sources tended to increase their percentage, and amounted to
7.1 percent. Adam Opel, A. G., in 1933 marked up its first
operating profit. In England, following Britain's departure
from the gold standard, Vauxhall realized its greatest
volume and profit, through putting out a low-powered car
more in line with English demand.
The source-distribution of General Motors unit sales in
the three Territorial divisions of the Overseas Operations
showed the following percentages for 1932:
American English
Source Source
Percent Percent
Export Division
English Division
German Division
Total Overseas
Operations
77.1
2.7
5.5
52.3
10. 1
97-3
20.4
German
Source
Percent
12.8
94-5
27-3
Total
IOO.O
1 00.0
IOO.O
IOO.O
In the early months of 1933 the Export pendulum
started its up-swing. Overseas shipments of General Motors
American-source cars were 45 percent greater in the first
six months of 1933 than in the corresponding period of
1932. June shipments were 133 percent greater in 1933
than in June, 1932. Sales of foreign source products by
Opel and Vauxhall also advanced during this period.
General Motors' export selling reflects careful choice of
distributors and dealers and a study of local needs; for each
country, having its own peculiar methods of doing business,
must be handled separately, although a casual survey might
class it with some other country on the basis of like volumes
of sales. In most territories General Motors products are
sold on an exclusive basis. Building up the reputation of
products is found to be slow work, and the quality of the
retail outlet no less important than the quality of the
product. Withal, it must be recognized that the first con-
sideration of the car buyer in many overseas areas, and
especially in Europe, is economy of operation.
264 The Turning Wheel
The world contains eighteen times the population of the
United States yet only 28 percent of the motor cars are
outside the United States, which has a car per 5.1 persons
as against one for about two hundred people over the
planet. America's opportunity to sell motor cars abroad
seems still large, but there are limitations. An extract from
a brochure, The Export Organization of General Motors,
1929 revision, sets forth some of these limiting factors over-
seas, where
. . . the motor car has not been generally accepted as an essential
utility as in the United States. Tariff and cost of freight and
handling add on the average 33 percent to the retail delivered price
of the car, compared to the delivered price in the United States.
... A Buick owner overseas is in the price class of the Cadillac
owner in this country. . . . Taxes are high and the cost of
gasoline, oil, tires and other items make the operation of a car
expensive by comparison with what it costs to operate in America.
The idea of the auto is an expanding factor, breaking
the barriers. The new countries of European settlement
which have developed exportable surpluses stand in the
first rank as regards cars per capita of population; those
of primarily British stock are sometimes spoken of as being
saturated: United States, Canada, South Africa, Australia,
and New Zealand. Their use of motor cars is not likely,
for some time to come, to be approximated by countries on
other standards of living, and under less favorable eco-
nomic conditions.
By comparison with her neighbors to the west, the Ger-
man Reich has only a half to one third the cars that might
be expected. Latin Europe, except for France, is not even
that well off in motor cars and, outside of Scandinavia,
central and eastern Europe are poorly supplied. Yet there
are bright spots the world around where the automobile
has come to be regarded as the necessity it is in the United
States, although the hinterlands even of these countries have
comparatively few cars. These areas are hopeful territories
for cultivation in the future.
In February, 1933, a policy of more fully decentralized
management went into effect. Four regional directors — for
General Motors Across the Seas 265
Europe, for South America and South Africa, for the Far
East, and for Australasia — became responsible for all
operations in their respective areas. They maintain head-
quarters at the home office in New York.
Through its far-flung organization, General Motors
meets all the civilized peoples of the earth. Into many and
varied social settings it has introduced its products through
representatives carefully selected from the standpoint of
character and understanding of the peoples among whom
they are to work. In extensive manufacturing and assembly
operations employing domestic labor, the Corporation ap-
plies both the factory technique and the labor policies de-
veloped at home. Care is taken to train native staffs, to the
end that General Motors' overseas operations may become
a part of the local scene to as large an extent as possible.
While the motor car is a tool which inevitably hastens
social changes by enlarging the radius of human action and
expanding the vistas of mankind, an attempt has been made
to effect its entry into new scenes without affront to existing
manners and customs. The result is that General Motors
has escaped difficulties due to nationalist feeling, and can
count citizens of all governments among its valued friends.
As highways are gradually improved and lengthened, as
international trade resumes, General Motors Export will
press on to more and more mutually helpful contacts with
all sorts and conditions of men who, whatever their sur-
roundings, have in common the desire for rapid transport
and the conveniences of a motorized civilization.
Chapter XIX
RESEARCH: THE MARCH OF THE OPEN
MIND
.HE automobile, as we have seen, came to pass as the re-
sult of a long evolution. At every stage the pioneers were
handicapped by faulty materials, lack of capital, adverse
public opinion and man's general ignorance of the forces of
nature. Some of their efforts appear almost childish today,
when the laws of matter and force have been tested and
recorded in an imposing body of knowledge which grows
day by day. But before we indulge in a pitying smile for
their makeshift arrangements, let us recall that the book
of science is by no means closed, and that at some distant
day the very achievements on which modern man so prides
himself will no doubt be considered inconsequential.
When the history of America is written centuries hence,
it will be noted that in the first quarter of the twentieth
century business began to subsidize scientific research. That
resounding fact may then be considered more important
than any of the political or military events of our era. The
laboratory, where trained men work quietly amid controlled
conditions, is a seed-bed of social and political change as
well as of scientific experiment.
Until recently, science was usually described as of two
sorts: pure science and applied science. Pure science was
held to be the fruitage of a disinterested search for truth
into which no profit element entered and from which no
practical benefit was expected. Work of this nature depended
for support upon university or other foundations, or upon
266
Research 267
the private means of investigators. The purest of the pure
scientists sometimes congratulated themselves on the pros-
pect that what they discovered could never be of the slight-
est use to anyone. In this respect, at least, the pure
scientists are defeated men, despite their triumphant con-
tributions to knowledge.
There is a driving force in human nature which makes
the pure science of yesterday the applied science of today.
Even celestial research sometimes comes down to earth.
Helium was discovered in the sun, through spectrum an-
alysis; thereupon its presence on the planet was assumed,
and after many years helium gas was found in such quan-
tities on earth that it is today a commercial product and a
factor in aviation and world politics. Years of pure scientific
research on energy waves preceded the practical application
of that knowledge through radio, with the result that every-
man's home now shares in the results of what was once pure
science.
Application of scientific knowledge to everyday life pro-
ceeded for several generations largely through the training
which the colleges and universities gave in their professional
courses. Once a man was graduated, he was cut off from
laboratory opportunity and association with minds keyed
to research. The tendency was for him to consider that
scientific progress ended as of the day he lost contact with
it. Of course there were notable exceptions to this gen-
eralization in all the learned professions, especially in medi-
cine and chemistry. But a mind of unusual resiliency marked
the man who, faced with practical problems in engineering
day after day, continued to peer behind the veil which hid
the unknown. Lesser minds might make minor innovations
as they coped with novel tasks, but a long and steady drive
on an objective which might never be found was usually
beyond the resources of the individual worker or his em-
ployer. Meantime, the independent inventor and investiga-
tor struggled along by himself, without backing, living
largely upon hope of developing something patentable.
After securing a patent, he had to look far and wide for
someone with capital enough to bring it to market. Great as
the achievements of these men were, industries growing in
268 The Turning Wheel
volume year by year could hardly depend upon such random
activities to produce the continuous improvements in tech-
nique upon which both earnings and market leadership de-
pended. Consequently General Motors, in common with
other large corporations, undertook the financing of scien-
tific research.
It should be noted, however, that while this research con-
cerns itself with long-reach problems involving many
branches of science and which may be years in process of
solution, the engineering staffs of the various subsidiaries
attack with equal energy the problems involved in improv-
ing models from year to year. Not only do the divisional
staffs commercialize research findings and ascertain their
practical applications, but they also originate and put
through important innovations on their own account, either
independently or in concert with other staffs. Among the
outstanding contributions of General Motors in the re-
search field are the following, some of which have been the
work of the Research Laboratories, some the work of
divisional staffs, and others the result of joint efforts be-
tween the Laboratories and the divisions :
1909-10 Battery ignition (Delco and Remy).
1911 One-piece spark plug shell ( AC ) .
1911-12 Self-starter (Delco). First used on Cadillac.
1915 Tilt-beam headlights. First used on Cadillac.
1920 Cellular type radiator, of ribbon stock (Har-
rison).
1923 V-type fan belt (General Motors Laboratories)
first used on Frigidaire and Chevrolet.
1923-24 Perfecting four-wheel brakes for quantity pro-
duction (Buick).
1923-24 Ethyl "knockless" gasoline, developed by Gen-
eral Motors Laboratories.
1924 Harmonic balancer, to eliminate difficulties
caused by torsional crankshaft vibration.
Duco lacquer finish.
1925 Crankcase ventilation. First used on Cadillac.
Thermo-control of water-cooling system
(Cadillac).
Research 269
1926 Balancing crankshafts in quantity production.
1927 Chromium plating. First used on Oldsmobile.
Engine-driven fuel pump.
1928 Synchro-mesh transmission (Cadillac).
1930 Silent poppet valve mechanism (Cadillac).
1930—31 Carbureter intake silencer (AC).
1932 Automatic choke. First used on Oldsmobile.
Super-safe headlights. First used on Cadillac.
1932-33 Fisher no draft ventilation.
1933-34 "Knee-action" front springs, and improved
weight distribution.
General Motors' first move toward the creation of a re-
search laboratory serving all constituent companies was
taken by President James J. Storrow in January, 1911,
when he conferred with Arthur D. Little, Inc., of Cam-
bridge, Massachusetts, on the advisability of setting up a
centralized testing and research laboratory and technical
department. The Little company's plan was accepted on
February 7, 1911. Until November of that year, the re-
search organization was known as the Engineering De-
partment; thereafter as the General Motors Research
Department. After one year this department was placed
on its own feet, the Little connection being changed from
management to consultation.
Among the problems studied by this early research staff
in Detroit were painting, lubricating and cutting-oil prac-
tices in various plants, tests of materials for purchasing
departments, and investigation of new parts and accessories
submitted to General Motors by outsiders. The original
research staff consisted of nine technicians and their as-
sistants. It was in this small laboratory, according to
Arthur D. Little, Inc., that the electro-dynamometer was
first made use of in the automobile industry.
The World War stimulated industrial research by lifting
technical and scientific problems to the importance of life-
and-death matters. Germany hitherto had led the world in
the close cooperation of industry and science, a partnership
encouraged by the government. Suddenly the rest of the
world realized that it had been laggard in this respect.
270 The Turning Wheel
Everywhere in America the man of science took on a new
importance, and nowhere did he find a warmer welcome
than among alert industrialists. This enthusiasm outlived
the war and continues unabated.
It was in this period that General Motors undertook
seriously the organization and financing of scientific re-
search, by taking over the Dayton Engineering Labora-
tories Company and organizing on that base, as of June 12,
1920, the General Motors Research Corporation, incor-
porated in Delaware for $100,000, with all the stock owned
by the General Motors Corporation. In that way it took
a short cut to a desired objective, as the Dayton Engineer-
ing Laboratories Company, long active in the scientific side
of the automobile industry, possessed a competent equip-
ment and tested staff.
CHARLES F. KETTERING
When one speaks of General Motors Research, the pic-
turesque character and record of "Boss" Kettering leap to
the mind. Charles Franklin Kettering was born on a farm
in Ashland County, Ohio, near Loudonville, on August 29,
1876. He passed in turn through district school, Loudon-
ville High School, the Normal School at Wooster, Ohio.
Determined to work his way through all available institu-
tions in the neighborhood, he was graduated from Ohio
State University in 1904, at the age of twenty-eight, his
education having been interrupted by outside work.
Research 271
After teaching school — as a teacher he must have been
full of surprises — he entered the telephone business at
almost its lowest rung, as installation man for the Star
Telephone Company of Ashland, Ohio. To this day, by way
of illustrating the need for efficiency in humble tasks, he is
apt to tell his hearers how he discovered there is a right
and a wrong way of digging post-holes. It is of record that
he almost bankrupted his company by installing what his
directors thought was too large a switchboard, but events
showed he was right, business flowing in to use the plant
once it was installed. Looking far ahead is a Kettering
habit and characteristic.
From telephones and Ashland he went to cash registers
and Dayton, the city where he found opportunity to reach
full stature. National Cash Register was then the last word
in specialty manufacturing and sales promotion. Its general
manager was E. A. Deeds, who recognized Kettering's
genius, and promoted him to head of the Inventions De-
partment. There Kettering developed and patented a num-
ber of improved cash registers, including one operated by
electricity which did not come into full use until several
years later.
With Colonel Deeds's backing, and that of other Dayton
capitalists, the Dayton Engineering Laboratories Company
was organized in 1911. While Delco, as it was called, stood
ready to tackle any problems in electrical or mechanical
engineering, its chief point of attack was Kettering's long-
considered and epoch-making idea of an electric self-starter
for automobiles. He believed that the same power which
switched on an automobile's lights and ignited its gasoline
also could be used to start the engine, thereby eliminating
the nuisance of hand-cranking.
Starting an engine by hand was difficult and often
destructive of temper and clothes. It required, usually, a
combination of physical vigors not always found in the same
individual — the strength of Ajax, the cunning of Ulysses,
and the speed of Hermes. Ulysses had to adjust the spark
and throttle just so; Ajax had to turn the engine over, some-
times over and over; and Hermes had to dart back like a
flash to the controls to advance the spark and regulate the
272 The Turning Wheel
gas before the engine went dead again. Not everyone
possessed all these qualifications; many an ardent motorist
of today despaired of ever learning the difficult art of
cranking, and the whole back-breaking operation was quite
beyond the powers of all women save those of Amazonian
proportions. This was a serious matter for the industry;
serious, too, were the physical accidents incidental to
cranking. The commonest of these was the broken wrist
caused by the back-firing of the engine; but more serious
hurts, sometimes even deaths, followed the forward charge
of the car upon the cranker when, as often happened, the
engine had been left in gear. It was an accident of that sort
which gave Delco its first commercial opportunity.
Mr. Kettering says Delco's greatest obstacle was the
closed mind he encountered nearly everywhere he went.
First, the battery manufacturers said his idea of self-start-
ing was absurd, for the simple reason that no electric
storage battery could be built with enough capacity to turn
a motor over. Why, they did not say; the fact that no such
battery had ever been built was enough to convince them
that it never could be done. They accepted their frame of
experience as final. In effect, they said, "There ain't no such
battery," and let it go at that. Finally Kettering had to
explain, cajole, and bully them into making bigger and
better batteries.
Meantime, Delco was trying to sell its self-starter idea
to manufacturers. They, too, had the closed mind. The
thing might work for a while, but it would soon exhaust
the battery. Then how about the lighting and ignition? And
what if it wasn't positive? "Positive" was a great word in
those days. If a thing wasn't positive, it might be a bad
buy; it often was. Finally Kettering got his chance, directly
as a result of one of those accidents common to hand-
cranking. An elderly friend of Henry M. Leland, founder
of Cadillac, was driving a Cadillac on Belle Isle bridge when
the motor stalled. Forgetting to throw out the clutch before
cranking the car, he sustained serious injuries. Mr. Leland's
grief over this accident drove him to encourage Kettering,
and to give the Delco starting, lighting, and ignition system
a chance. On February 27, 1911, the first Delco starter was
Research 273
installed on a Cadillac car. It worked so well that in 1912
Delco was standard equipment on all Cadillac cars. Self-
starting had arrived.
Other self-starters soon appeared on the market; in fact,
more than one man was working along that line when Ket-
tering was doing his pioneer work. Various systems of self-
starting had been worked out before Kettering applied
electricity to the task — among them compressed air, springs,
and acetylene gas. Other electrical manufacturers, notably
the Halbleib brothers at Rochester in their North East
plant, had worked out ways of doing the job about the same
time as Kettering did. But in the ensuing litigation, the
Delco patents held firmly enough to establish the priority
of self-starting with Kettering and Delco.
With men of the Kettering stamp one thing leads to an-
other with almost lightning rapidity. This has hardened into
a code based on experience. Among the Kettering apho-
risms, the value of time and the need for swift mental
change are emphasized again and again. "Unless we
progress from year to year we lose ground." "Today's
dream is tomorrow's actuality." "Changes are born in men's
minds and worked out in laboratories." Against a mental
background of that kind, standing pat with the Delco start-
ing, lighting, and ignition system, no matter how successful
it was, would be merely standing still. The new idea came
from a customer who had used his Cadillac to light his
summer cottage in an emergency. He wrote in to buy a
Delco system for domestic use. The result was Delco-Light,
an electric power plant especially designed for farm and
rural residences, another company being formed for its
manufacture by the swift-moving Daytonians. From Delco-
Light they went on to other electric-power adaptations for
the rural market, establishing the Domestic Engineering
Company. Another of their corporate creations was Dayton
Metal Products Company. The Dayton-Wright Airplane
Company, manufacturing airplanes during the war, was an-
other important development established by this enterpris-
ing group of Ohio industrialists.
In 1916 W. C. Durant took over the Dayton Engineering
Laboratories Company as part of his United Motors
274 The Turning Wheel
merger, and with that group it became part of General
Motors in 1918. The associated companies in which Mr.
Kettering was a leading factor followed the Laboratories
into the General Motors fold within the next few years.
Meantime Mr. Kettering had been commissioned to set up
and direct research operations for the Corporation at Day-
ton, under the name of General Motors Research Labora-
tories. This was incorporated as General Motors Research
Corporation, June 12, 1920, and transferred to Detroit in
1925, where it now occupies a specially constructed build-
ing directly back of the central offices of the parent cor-
poration. General Motors Research Corporation is now
inactive, the operation being conducted as a department of
the Corporation under the title, "Research Section, General
Motors Corporation."
The Research Building houses all the Laboratories'
equipment under one roof. It contains chemical and physical
laboratories, shops, drafting rooms, library, and all other
necessary facilities. An eleven-story building, it is the third
occupied by the Laboratories, the others being outgrown
by the expanding enterprise.
To clarify the story of research, the Laboratories re-
cently issued a booklet prepared by its engineers and
scientists. It states :
The greater part of the engineering and research, which makes
General Motors cars better, is carried on by the engineering
departments of its car manufacturing divisions. But, in addition,
the divisions have the Research Laboratories to help them when-
ever and however possible.
The Research Laboratories act in a consulting capacity to the
divisions, and are continually searching for new principles and
ideas of a more fundamental and scientific nature than would be
possible for any of the individual engineering departments, which
must be more concerned with immediate production problems.
How the various departments and sections of the Re-
search Laboratories work out specific problems may be seen
with reference to some of the more important contributions
of General Motors research. Take, for instance, crankcase
Research 275
ventilation — one of the meritorious achievements in motor-
car advancement during the last decade. Complaints from
motorists each spring showed a seasonal tendency toward
balky motors and stretched timing chains. These early
spring troubles attacked cars which had been conservatively
driven, rather than those pushed at top speed with accom-
panying high engine temperatures. The affected parts, upon
examination, showed a reduction in size beyond that to be
expected from ordinary wear and tear.
In the Chemical section, undersized and heavily pit-
marked parts were analyzed. The chemists found sulphate
of iron in unusual quantity, and immediately recognized
that sulphur was the villain in the piece. They set out to
determine the relation of sulphur in the fuel to the weather
conditions of winter and early spring. The explanation was
eventually found. When a gasoline engine is cranked again
and again in cold weather, as it frequently must be, water
condenses on the cold cylinder walls and trickles down into
the crankcase. This water comes from the burning of the
fuel and air in the engine — about one gallon of water for
every gallon of fuel. During the process of fuel consump-
tion, the sulphur in the fuel is being burned, forming oxides
of sulphur which, united with the water, condensed in the
engine to form sulphurous or sulphuric acid. This acid was
corroding the metal parts, wasting away the chains, and
eating the piston pins and camshaft. Even in diluted form,
the acid slowly etched nearly all moving parts of the engine.
It is one thing to find trouble; another to correct it. Water is a
by-product of the process of getting power from fuel. It was not
possible to keep out the water, nor was it practical to eliminate
sulphur entirely from the fuel.
The chemists reasoned that since they could not stop the acid
from forming, they must prevent the acid from coming into contact
with the metal parts of the engine, for the trouble arose only when
acid touched metal. . . . Open-minded toward the application of
the commonplace to the intricate, the chemists put this to the test.
To keep the air in the engine continuously clean and free from
acids, why not open the windows?
So they put windows, so to speak, in the crankcase. And crank-
case ventilation put an end to "spring fever" in the automobile.
276 The Turning Wheel
This is a shining example of the work done in the chem-
istry of automobile progress. From first to last, from proc-
essing of raw materials to the last gallon of gasoline
consumed before the car goes to the junk yard, the auto-
mobile is a chemical device. As the Laboratories put it:
. . . The materials entering into its construction, the fuel that makes
it go, and the oil that lubricates it are chemicals. Iron, Copper,
Lead, Tin, Carbon, and- Tungsten are used in the electrical system.
Iron and Steel make the chassis strong and durable. Babbitt and
Bronze are used for bearings. Wood, Glass, Cotton, Wool, Nitro-
cellulose, and Rubber go into a body. Oxygen unites with the
Hydrogen and Carbon of the gasoline and furnishes the power to
propel the car. The Chemical Section of the Research Laboratories
finds ways to improve and make better use of these chemical
materials.
Fuel is so important an element in the motoring problem
that it receives the undivided attention of a special section.
There goes on the steady search for more economical fuel
consumption. Fuel research is marching toward greater
power and more miles per gallon, a fact which is reassuring
in view of the frequent announcements of dwindling oil
supplies and prophecies of future oil famines.
In the field of fuel research, an outstanding develop-
ment has been the creation of Ethyl gasoline. One of the
first barriers to progress in fuel research was the "knock."
The knock had to go before fuel research could proceed
further.
After years of research, a specific cure for the knock was
discovered. The story of the discovery of Ethyl illustrates
how a great laboratory feels its way along from one stage
to another, applying the old method of trial and error but
with greater speed and precision, until at last by process of
elimination it evolves a specific remedy for particular ail-
ments even though it may not have discovered the funda-
mental cause of the trouble.
Chemists noticed that ordinary combustion of gasoline
produced a bluish flame, while knocking combustion pro-
duced yellow or orange flame. They thought that if the
gasoline were darkened the knocking might be prevented,
Research
277
because darker color might absorb more of the radiated
heat from cylinder walls. Trying one coloring matter after
another, they concluded that certain coloring agents were
effective on knocks because of their chemical properties and
not because of their colors. Effective knock suppressors were
found to be closely grouped from the standpoint of atomic
weights. So it was decided to try the neighboring elements
in the atomic scale.
Research Building — home of General Motors Research
Laboratories, Detroit
One of these, tellurium, gave Thomas Midgeley, Jr. the
key to the riddle. By eliminating other possibilities he con-
cluded that the best available anti-knock agent was tetra-
ethyl lead. Although composed of cheap elements, lead,
carbon and hydrogen, the compound was rare, because it
had little commercial use and was not produced in quantity.
Other chemists aided in bridging this gap. Now it costs little
to use knock-proof gasoline. In recognition of his success,
Mr. Midgeley was awarded the Nicholas Medal by the
American Chemical Society.
278 The Turning Wheel
The commercial rewards from this research activity have
been large. In order to achieve a wide market for the new
fuel in the shortest possible time, General Motors Corpora-
tion joined with Standard Oil Company of New Jersey to
form the Ethyl Gasoline Corporation which was incor-
porated in Delaware, August 18, 1924, with $5,000,000
Common stock. Of this only $1,500,000 has been issued, of
which General Motors took one half. Its investment has
since been more than repaid by dividends, and Ethyl has
become a household word to indicate anti-knock motor fuel
obtainable on practically every highway. Under a liberal
licensing policy, the Ethyl compound is now used by nearly
all of the leading refiners. On the board of the Ethyl Gaso-
line Corporation, General Motors is represented by
Donaldson Brown, Irenee du Pont, Charles F. Kettering,
and Alfred P. Sloan, Jr., while Mr. Midgeley serves Ethyl
as vice-president.
Six years after Ethyl gasoline was introduced, its effect
upon the industry was described as follows by C. F. Ketter-
ing and Allen Orth in The New Necessity :
The car manufacturers have not hesitated to take advantage of the
possibilities offered by this new fuel. They have raised the com-
pression ratio of their engines until now the average ratio is a
little over 5 to I as compared to the 3j^ to I ratio usually encoun-
tered fifteen years ago. Piston speeds have jumped from 1,000 feet
per minute to over 3,000. The ultimate result is that from an
engine of 250 cubic inches displacement, we now obtain over 80
horsepower instead of the 30 horsepower of 1915. Of course this
cannot be attributed solely to the change in fuels. Engine designers
have accomplished unheard of things during this period. They have
done the seemingly miraculous with combustion chambers, valves,
and the design of the rapidly reciprocating and rotating engine parts.
Both the Laboratories and the General Motors Proving
Ground possess exceptional facilities for testing completed
automobiles and the parts from which they are constructed :
It is difficult to observe how the various parts of a car are operating
when the car is traveling one hundred miles an hour over the
Research 279
road. The research engineer, confronted with the problem of
finding out what might be happening under these and other driving
conditions, had to devise other methods.
The alternative was to make the road run under the car. The
chassis dynamometer was designed to accomplish this. The rear
wheels of the car rest on two large rollers, connected to a dyna-
mometer or power-absorbing and measuring machine. Thus, the
engine and chassis behave as if they were speeding down a road,
yet the car stands still ; and the engineers are enabled to stand by
the car, taking measurements and studying performance in a way
that would be impossible otherwise.
Weather conditions have to be manufactured to meet the de-
mands of research, for a group of engineers, seeking facts about
the operation of an automobile under varying temperatures, would
find it both impractical and inconvenient to be traveling constantly
between the arctic circle and the tropics.
So the equipment in the Engineering Tests Section of the Re-
search Laboratories includes a cold room 2,000 times as large as the
average household refrigerator. The temperature inside this room
falls as low as 50 degrees below zero.
The room is large enough to hold two automobiles, and the en-
gines may be operated with the air at any desired temperature.
With this equipment, research engineers are checking the opera-
tion of carburetors, starting equipment and lubrication, as well as
checking the action of materials and parts under extreme weather
conditions.
The engine is viewed as a problem in mechanics and
thermodynamics, the object of research being to find the
best use of heat. The Laboratories define the automobile
as a self-contained factory using gasoline and air as raw
materials and producing chiefly water, carbon dioxide, and
carbon monoxide, with power produced as a by-product.
The engineers in this section follow the course of cooling
air into the combustion chamber, into the exhaust pipes,
and through the mufflers. At one end of the line is the spark
plug, at the other end is the muffler, between them lie the
cooling system and the engine. Along this line are also
the gears, transmitting power from the engine to the
wheels; consequently the Dynamics Section studies clutches,
universal joints, propeller shafts, differentials, axles, and
steering devices. These involve many varieties of gears.
280 The Turning Wheel
The gear is a mathematician's paradise. It entails the study of
involute, cycloidal, epicycloidal, and hypocycloidal curves. There
are spur gears, worm gears, helical gears, and spiral bevel gears,
all with their own individual problems which bring up all sorts of
technical questions, such as the pressure angle, diametral pitch,
circular pitch, line of action, addendum, and dedendum. Few
mechanical parts seem so simple when finished, yet involve so
much detailed study as a gear.
Engineers cooperate with those of the manufacturing
divisions in the continuous effort to improve the perform-
ance, quietness, smoothness, and durability of automobile
power plants. This work is never-ending, as models are
being redesigned all the time, and every change has to be
studied with an eye to its effect on the entire car.
The crankshaft, the backbone of the engine, furnishes an interesting
example of the number of factors influencing the design of various
parts. The power and speed of the engine, the weight of its moving
parts, the number and arrangement of its cylinders, all play their
parts in determining the size and strength of the crankshaft and the
size of its bearings. Balance and smoothness must not be over-
looked. To eliminate the roughness inherent in conventional recip-
rocating engines the crankshaft is usually counterbalanced to offset
the forces arising from the up-and-down motion of the pistons and
part of the connecting rod.
The valves and valve gear bring up their own peculiar problems.
The intake valves must open and close at the proper time to give a
full charge of fuel to the cylinders, and the exhaust valves must be
timed properly to rid the cylinders of the burned gases. These
valves must open and close several thousand times a minute, noise-
lessly and without variation, and at red heat. The engineers must
know materials which can withstand the heat and continuous
hammering of the valve on its seat. They must calculate proper
sizes, seat angles, lifts, and timing of the valves to allow a full
charge of gas to be taken in, and to permit all of the exhaust gases
to be expelled. The spring must be of correct size and tension, and
the camshaft must give correct timing without noise.
An enduring element in this work has been the creation
of machines for statically and dynamically balancing such
parts as fly-wheels, crankshafts, clutches and propeller
Research 281
shafts. Here was achieved the "harmonic balancer. " This
device balances out the torsional vibrations in the crank-
shaft, eliminating an annoying source of noise and undue
wear as cumulative explosions give periodic blows to the
crankshaft.
A code of General Motors Laboratories might be com-
pressed into fault-finding and fact-finding. Its engineers are
paid to find fault with everything about a car. It is the
spirit of research to be dissatisfied with anything as long
as improvement remains possible. Dissatisfaction by itself
is not enough. Knowledge must be extended. New facts
must be found, in order to help manufacturing divisions
improve their cars. A Laboratory spokesman has stated
the case in these words:
One might think that engineers could design a mechanism perfect
once and for all if they gave it study enough, but they can't.
Everyone is changing. Change is the watchword of a progressive
people and new experience brings new knowledge.
Research is insurance the General Motors manufacturing di-
visions take out to help them keep just ahead of the calendar.
Sooner or later and usually with all possible dispatch, the
economies developed through research affect prices, giving
the consumer more value for his dollar. Research is one
reason why the automobile dollar has brought more values
in automobiles and tires, consistently, through the past
fifteen years than the general merchandise dollar. During
the boom days, when the cost-of-living dollar was worth
only 68 cents as compared to the dollar of 1914, the auto-
mobile purchasing dollar was worth $1.28. For many years,
automobiles and tires were practically the only goods which
the farmer could buy to advantage, when farm prices were
compared with those of manufactured goods. For this,
quantity production and consistent research are jointly re-
sponsible.
Probably no piece of research has saved the consuming
public more money than that which resulted in the wide-
spread use of Duco and other quick-drying finishes for
motor cars. The costs of painting and varnishing auto-
mobiles on the old system were high, because fifteen to
282 The Turning Wheel
thirty days were required to paint a car. On a heavy pro-
duction program in a large plant, this meant that as many
as fifteen thousand cars might be in process of painting at
one time. "Twenty million dollars in automobiles sitting in
warehouses waiting for the paint to dryl" A month might
be required to finish a high-grade car. Regular varnish finish
which the automobile industry had inherited from the car-
riage trade was a slow process. A black enamel finish could
be completed in a few hours, but it was used chiefly for
fenders, except on cheap cars which might have black-
enameled bodies.
In 1921, a 'Taint and Enamel" committee was appointed
to consider the whole problem of painting and finishing cars.
The industry absolutely had to have a finish that would decrease the
time . . . from days to hours; it must not require temperatures
beyond those wood could stand; it must be as inexpensive as the
varnishing process yet it must be applicable in all colors and last
the lifetime of the automobile ... it must have all the advantages
of enamel and varnish without any of the disadvantages.1
These requirements daunted the paint and varnish trade.
Their representatives said: "You can't change nature." Just
as the battery people years before had declared that no
battery could be built strong enough to start a gasoline
engine, so paint manufacturers, in 1921, considered as im-
possible whatever was outside of their experience. How-
ever, in various factories, cellulose nitrate was being sprayed
on toys. Tests proved that this product dried even too fast
for motor cars, but this demonstration neatly bracketed the
research problem. Varnish was too slow; existing lacquers
too fast. Between these extremes there must be some suit-
able chemical combination. What was it?
General Motors Laboratories worked out this particular
problem with the help of other research staffs, notably that
of the du Fonts. When the paint manufacturers upheld the
old methods by saying they produced the best finish in the
world, he thought, "What they mean is: it's the best finish
they know anything about."
lettering and Orth : The New Necessity, pp. 87-8 ff .
Research 283
To follow Mr. Kettering and his many associates through
all the mazes of their inquiry in chronological sequence
would be too long a story. The riddle was finally solved
after this manner. About a century ago, a French chemist
discovered a brilliant, varnish-like coating by dissolving
potato starch in concentrated nitric acid. A fellow country-
man of his, using cotton instead of potato starch, called the
resulting nitro-cellulose "Pyroxylin." Later a German
chemist treated cotton with a mixture of sulphuric and nitric
acid — result, gun-cotton. After the Spanish-American War
military and naval needs brought forth cellulose nitrate for
smokeless powder, and incidentally revived interest in
cellulose-nitrate lacquers. Low-viscosity cellulose nitrate
today forms the basis of automobile finishing lacquers.
Another constituent of automobile lacquer is butyl
alcohol. With efforts to make synthetic rubber about 1910,
a microorganism was discovered which converted field corn
into butyl alcohol, acetone, and ethyl alcohol in the ratios
of 6 13 : 1. Acetone had commercial use in the manufacture of
smokeless powder. The common source of acetone was char-
coal, but when the World War increased the demand for
smokeless powder there was not enough charcoal available
for the acetone process. So the greatest of the naval powers
fell back on the assistance of the humble microorganism
which devoured corn and turned it into the chemicals men-
tioned above. Mars' tiny assistant refused to make acetone
without producing twice as much butyl alcohol; the latter
was a cumbersome by-product; for years it was thrown away
as fast as made. The demand for acetone, continuing after
the war, moved American distilleries, closed by the Eight-
eenth Amendment, to use their plants in its manufacture.
One distillery, hoping that some day a use would be found
for butyl alcohol, stored that liquid in a large swimming
pool. Eventually they found that butyl alcohol was a good
substitute for amyl alcohol, long used as raw material for
making amyl acetate or "banana oil," an important in-
gredient of certain lacquers. So the cycle of investigation
and experiment was completed by utilizing a by-product,
then of almost no value, and which could be made in any
desired quantity at low cost.
284 The Turning Wheel
Today practically every car has a lacquer finish — a finish that can
be applied in less than eight hours; one that is more durable, more
easily applied, and more attractive than either varnish or black
enamel. However, the use of this material has not been confined to
the automobile. It has invaded the home and with it has come
color — furniture, radios and refrigerators are now lacquer-finished.
. . . this development is a reassurance that nature is still on the
job and always will be, operating through human agencies to meet
the ever-increasing and broadening needs of people, providing a
new substance to replace a disappearing one. There is no waste in
nature. What we regard as waste is merely a dormant substance
awaiting the hand of research to start it serving some practical and
valuable career.2
When anyone says that a desired goal cannot be reached
because the process is contrary to nature, he is referring
merely to that small segment of nature which he compre-
hends. To explore that which is at present beyond compre-
hension is the whole duty of science.
Industrial science, as pursued under commercial auspices,
must concentrate upon problems likely to have practical re-
sults within a reasonable time. Economics enters the scien-
tific investigation at this point. There must be a nice balance
between vision and practicality. General Motors has been
fortunate in preserving that balance. One of the Kettering
advices which has been taken to heart by the Laboratories
organization is this: "Engineering must partake as much
of economic horse-sense as it does of scientific principle."
The truth of this is revealed in the vast number of patents
which never reach the market. Like all manufacturers, Gen-
eral Motors welcomes engineering ideas which come to it
from outside, but, after these have been thoroughly tested
from all angles, the verdict is apt to be disappointing to
the inventors. Statistics show that out of 35,000 inventions
submitted to a certain manufacturer, only one out of 5,000
had merit. The inventors of the others apparently had
wasted their time and money. Obviously, industry cannot
wait for such random aid. If the tests through which out-
side inventions must pass are considered to be too severe, it
must be remembered that millions are at stake in every
2Kettering and Orth: The New Necessity, pp. 92-3 ff.
Research 285
change introduced into a manufacturing program based on
quantity production.
Practical considerations are also behind the work toward
standardization in which the Laboratories join through
their association in the Society of Automotive Engineers. In
the early days of the industry, all automobile parts were
made by hand or on simple machines. The result was such
variety that repairs were unduly expensive. Even the manu-
facturers had difficulty in securing standardized parts. Ac-
cording to J. K. Barnes, 800 different kinds of lock washers
were made to fit three or four bolts of varying sizes. Auto-
mobile makers used 1,600 sizes of steel tubing; one manu-
facturer alone using 80 sizes. Standardization has now
brought lock washers down to 16 sizes and steel tubing
to 17 sizes in 13 thicknesses. Two hundred and thirty alloy
steels have been reduced to 50 varieties. More than 200
parts and materials used in automobile manufacture have
been standardized since 1910.
On the subject of standardization, Mr. Kettering has this
to say as to the benefits automobile owners have received
as a result:
That word "interchangeable" is the sum and substance of all stand-
ardization. It is the key to mass production. Fabrication has
become a matter of timed operations rather than of individual
ingenuity in getting mismatched pieces together. There are specified
tolerances that are rigidly adhered to. Pieces are no longer antag-
onistic. They are interchangeable — they fit. And the owner now-
adays, when a plug fails him, goes to an accessory shop or maybe
to a corner filling station, and asks for a spark plug. In about the
time it takes to replenish the water in the radiator, it has been
installed and he is on his way again. The owner and the manufac-
turer both profit by this new form of simplicity. It has been
estimated that the annual saving to the automobile industry alone
amounts to three quarters of a billion dollars.8
There are constants in the automobile business, plenty
of them; but, paradoxically, the greatest constant of all is
change. He who stands still is lost. The public must be
wooed through change as well as through quality; science
3Kettering and Orth: The New Necessity, p. 100.
286 The Turning Wheel
and art provide the material for beneficial change in such
abundance that the timing of change becomes an all-
important factor; hence the question which management
faces is not so much, "Shall we change?" but rather, "How
and when shall we change?" Mr. Kettering calls his re-
search workers "economic-change men." They provide the
management with changes from which it can choose those
for which it considers the public is ready.
Not all beneficial changes can be introduced drastically
as soon as they have been developed. While the public in-
sists on change, it prefers evolution to revolution. Millions
can be lost by being too far ahead of the times, just as they
can be lost by being too far behind the times. The average
man likes to move forward by short steps on firm ground
rather than by long leaps into what he considers the dark.
Scientists may be quite aware that the fancied darkness is
really broad daylight, but there is nothing gained by argu-
ing against a public prejudice in expensive advertising space.
In a year or two, the public may have caught up, and then
may accept gladly what would have been rejected before.
The findings of the economic-change men of General
Motors must consequently be winnowed through the sieve
of public acceptances.
In acting as a general staff for the engineers of all the
Corporation's manufacturing divisions, the Research Labo-
ratories are not confined to the automobile field. As the
Corporation grows in the diversity of its products, the Re-
search Laboratories also tend to become more diversified.
Various of its members have done effective work in re-
frigerants; others are likely to give keen attention to the
future of aero-dynamics. General Motors has recently be-
come a large factor in aviation, and the Research Labora-
tories henceforth may consider aviation as well as auto-
motive problems.
Back of the whole research program is the progressive
philosophy that one change leads inevitably to another, that
new goods produce new wants, and that through innova-
tions in the conveniences of life both man and society reach
higher levels of comfort and efficiency. The director of the
Research 287
Research Laboratories has quoted approvingly this state-
ment of Thomas A. Edison, and the Laboratories staff
will do its part to raise what Mr. Edison calls the "think-
ing capacity of society," by applying its cumulative experi-
ence and specialized wisdom to more and more fields of
applied science :
... the automobile has done more to make America a nation of
thinkers than any other invention or agency. The great value of
the automobile is not the fact that it has made it easier and quicker
and cheaper to go to places, but the fact that it has inspired several
million people to go. It has set their gray matter to work. It has
revealed to them how petty and meaningless their lives were
becoming. . . . Most of us view the automobile principally as a
great business and manufacturing achievement. It is — but it is a
greater educational achievement. In the beginning we were a
pioneer people — a restless people. But when things came easier for
us we began to lose our restlessness. The automobile is helping to
restore it. And that is one of the most healthful signs of the present
generation. Restlessness is discontent — and discontent is the first
necessity of progress. Show me a thoroughly satisfied man — and I
will show you a failure. The wheels of progress — especially those
of the automobile — have worked results which may be called
miracles. But their service has been to raise the thinking capacity
of society.
This statement by the great Edison is one of the most
penetrating tributes ever paid to the automobile industry;
and, beyond that, it is a stirring declaration of the spirit
which moves General Motors Research Laboratories — a
reasoned dissatisfaction with what is, a reasoned certainty
that what it does will improve the lot of mankind.
Chapter XX
BODY BY FISHER: THE MOTOR CAR AS A
STYLE VEHICLE
T
LH
.HE year 1908 seems to have been a lucky one for indus-
trial beginnings, particularly in Michigan and the automobile
trade. In that year General Motors was born and also
Fisher Body, destined to become one of its larger subsid-
iaries and of such proportions that, standing by itself, it
would be one of the nation's most important industries.
Six Fisher brothers, all craftsmen, were led to Detroit
and fortune by the eldest of them, Fred J., who came
to the hub of the automobile world from Norwalk, Ohio,
in 1901, where their father, Lawrence Fisher, made car-
riages and wagons. The brothers, learning their trade
under the father's watchful eye, were vehicle craftsmen of
the third generation, the grandfather Fisher having been
skilled in that art in Germany, though in this country known
as a merchant in Peru, Ohio. His son, Lawrence, lived to a
ripe age and, before his death in 1921, had the satisfaction
of seeing six of his sons rated among the masters of their
craft in America. These six brothers — Fred J., Charles T.,
William A., Lawrence P., Edward F., and Alfred J., — are
today actively associated in General Motors, Fisher Body,
and many other large enterprises.
Going to work in Detroit for C. R. Wilson Body Com-
pany, then the largest firm in the automobile body business,
Fred J. Fisher rose to be superintendent. Within four
years he and Charles T. Fisher, who had been associated
with him at Wilson for two and a half years, formed Fisher
288
Body by Fisher 289
Body Company, incorporating in Michigan in July, 1908,
for $50,000, with slightly more than $30,000 paid in.
A few months later Louis Mendelssohn and Aaron Men-
delson became associated with the Fishers, obtaining a sub-
stantial financial interest, and also became actually engaged
in the business, the former as treasurer and the latter as
secretary, remaining in these positions until the time Fisher
became a part of General Motors Corporation.
The venture looked hopeless to many. The country was
still shaken from the effects of the 1907 panic. Money was
tight; general business slow. For those who have courage,
however, a "bad" time is the best time to start a business
— then a bold man can rent real estate cheaply, and can get
his pick of the labor market. If he knows his business bet-
ter than his competitor, he is safe in starting at scratch, be-
cause his costs will be lower than those of his competitors.
The business prospered from the start, since these Fisher
brothers — the younger brothers soon joined the older ones
in Detroit — knew how to build automobile bodies superla-
tively well. There was plenty of room for improvement in
body building. The older concerns had been builders of
carriage bodies, and they brought the simple arts and
machinery suitable for carriage bodies over into the auto-
mobile business with as few changes as possible. Hence,
they were a little slow to realize that far greater strength
and resilience were required for powered vehicles than for
drawn vehicles. As a result, early automobile bodies soon
became loose and noisy under road shocks. Even relatively
simple open bodies did not give continuous satisfaction.
The Fishers kept their eyes on closed car possibilities
from the start. They saw that motoring would remain a
summer sport until drivers and owners could be com-
fortable in the winter months. Women would never be really
pleased with the automobile so long as their gowns and hats
were at the mercy of wind and weather. After pressing
these points on car manufacturers for two years, they were
at last rewarded in 1910 by an order from Cadillac for 150
closed bodies, the first "big order" for closed car bodies
ever placed in America. Seeing more business ahead in
this line, the Fishers organized the Fisher Closed Body
290
The Turning Wheel
Company in December, 1910, thus initiating the march of the
closed car to a position where it now dominates the market,
with approximately 95 percent of all American cars carry-
ing closed bodies. In 1912 Fisher entered Canadian produc-
tion with Fisher Body Company of Canada, Ltd., at
Walkerville.
These plants turned in combined profits of $369,321
in 1913-14, $57^,495 in 1914-15* and $i,39°>592 in
CHARLES T. FISHER
One of the Founders of Fisher Body
1915-16, profits based on increasing quantities and de-
creasing unit costs. Indeed, one of Fisher's greatest difficul-
ties was inducing manufacturers to place reasonable prices
on closed cars, consonant with the prices Fisher charged for
their closed bodies. At this period the company contem-
plated entering the automobile business in order to break
the deadlock and bring closed cars to the public at fair
prices. Finally one manufacturer broke away from the old
practice; others followed, and closed cars became popular.
Body by Fisher 291
The vigorous organization, pushing on, merged its three
companies into the Fisher Body Corporation, incorporated
in New York, August 22, 1916. Authorized stock was
$6,000,000, par $100, 7 percent cumulative Preferred
stock, of which $5,000,000 is shown as issued, and 200,000
shares of Common stock, no par, but valued at approxi-
mately $10 a share in an early statement. Starting with
little more than $30,000, in 1908, Fisher Body had climbed
in eight years to the point of owning land and buildings
worth more than $2,000,000, and machinery worth nearly
$1,500,000. Its capacity was 370,000 bodies a year, the
largest in the industry.
In 1919, after three successful years in which the Fisher
name had become established, the Fishers sold to General
Motors Corporation a three fifths interest in the Fisher
Body Corporation, 300,000 of the then outstanding
500,000 Fisher shares at $92 a share, for $27,600,000, on
a series of five-year notes. General Motors agreed to pur-
chase all its automobile body requirements from Fisher for
ten years. The management remained with the Fishers.
Both parties reaped substantial advantages from this
arrangement. General Motors placed its body business with
the leading producer. On the other hand, Fisher Body
solved a problem which had been growing in proportions as
Fisher increased in size. With a $20,000,000 property to
conserve, it became a matter of prudence for Fisher to safe-
guard its future by seeking an assured outlet. There were
several ways in which greater security might be obtained.
One way was for them to manufacture automobiles, a plan to
which serious thought was given. Two other manufacturers
were in the market for the Fisher connection when the Gen-
eral Motors union was being considered. General Motors
was accepted partly because of the Corporation's stability,
partly because its cars occupied a wider price range than
those of any competitor. While Fisher was interested in
quantity production, it was also interested in continuing to
build high-priced bodies for cars with quality reputation.
General Motors offered the connection under which the
Fishers could best maintain their leadership which had been
292 The Turning Wheel
firmly planted in the public mind by their consistent build-
ing of quality bodies.
With this important transaction completed, Fisher ex-
pansion went on swiftly, the whole automotive world being
then in an expansive mood. National advertising began to
carry the craftsmen's name to the public. Fisher Body Ohio
Company was incorporated October 17, 1919, in Ohio, to
produce bodies in a Cleveland plant. The capitalization
was $10,000,000 of 8 percent cumulative Preferred stock,
par $100, and 100,000 shares of Common, no par. Control
was in the Fisher Body Corporation but Cleveland capital
was largely interested. The plant erected there, with
1,500,000 feet of floor space, was then the largest body
plant in the world, with capacity for 7,000 employees. It is
now the second largest of the Fisher plants, having been
surpassed by Flint No. i. Fisher Body Corporation
eventually acquired the entire stock of the Ohio company.
To insure its threatened glass supply, Fisher made a
$4,000,000 investment in National Plate Glass Company,
acquiring control. This leading plate glass producer had
been incorporated in Maryland, January 17, 1920, to
acquire three large and well known glass factories : Colum-
bia Plate Glass Company at Blairsville, Pennsylvania,
organized 1901; Federal Plate Glass Company at Ottawa,
Illinois, organized 1903; Saginaw Plate Glass Company,
Saginaw, Michigan, organized 1900. These companies had
a combined annual capacity of 11,000,000 square feet of
plate glass, and under a ten-year contract with Fisher Body
dated January i, 1920, they obtained an assured outlet for
their product in the growing closed car trade.1
General Motors made a further investment of approxi-
mately $4,500,000 in Fisher Body in the up-swing of 1923.
Fisher prospered greatly in the next three years, a period
marked by the acquisition of Fleetwood Body Corporation,
dating from 1919, and the purchase or building of large
properties in many parts of the country. On June 30, 1926,
the outstanding minority interest in Fisher Body Corpora-
tion passed to General Motors Corporation on the basis of
1Part of Fisher interests in National Plate Glass Company have since been
acquired by other companies.
Body by Fisher 293
one and one half shares of Fisher for one of General
Motors, 664,720 shares of General Motors Common being
paid. In the following year General Motors completed
acquisition of Fisher Body Ohio Company. Since 1926
Fisher Body Corporation has functioned as a division of
General Motors, but remains under Fisher management.
Fred J., Charles T., Lawrence P., and William A. Fisher
are directors of General Motors. Mr. E. F. Fisher is vice-
president in charge of production in the far-flung Fisher
manufacturing activities, and Mr. A. J. Fisher is vice-
president in charge of engineering, a responsibility em-
bracing the creation and development of as many as seventy
individual body types and styles annually for General
Motors cars.
Before Fisher Body Plant No. i at Flint, Michigan, now
the largest in the world, was taken over from Durant
Motors, Buick bodies had been completed in Detroit and
were hauled to the Buick plant by truck and trailer over
the Dixie Highway. These long, box-like vehicles moving
on the Dixie were familiar sights for many years to
Michigan motorists. Fisher's decision to build Buick bodies
in Flint started that city on another wave of growth, since
the plant employed in normal times 5,500 men in its more
than 2,000,000 feet of floor space. Large as this plant was
when Fisher took it over in 1926, it was further expanded.
Fisher Plant No. 18 in Detroit employs almost as many
men as Flint No. i. Were it not for new handling methods
originated to conserve floor space, labor and materials, still
larger factories would be required for the huge production.
Fisher Body is the world's Largest user of steel for auto-
mobile body construction, its requirements reaching 335,-
000,000 pounds a year. On all models, from the lowest in
price to the highest, the sturdy body is encased in steel,
electrically welded into a single unit. Strength and safety
body-tests applied to the lowest priced Fisher-equipped car
have shown resistance to 12,000 pounds (six tons) diagonal
pressure without appreciable damage to any part of the car
or body structure.
Among the many advances achieved in these bodies is the
extensive use of solid steel panels. Special steel had to be
294
The Turning Wheel
developed flexible enough and strong enough to endure
tremendous strain. Years of patient work on the part of
Fisher engineers and steel mill experts finally produced a
metal which could be drawn large enough for a body panel
under a pressure of 800 tons. The typical Fisher Body of
today incorporates the strength of some 200 basic parts, on
which more than 1,200 distinct operations are performed
to make certain of their accuracy and quality. All the body
parts for a given model are as interchangeable as machine
parts.
Miniature Napoleonic coach, winner in one of the competitions of
the Fisher Body Craftsman's Guild
The Fisher No Draft Ventilator system, applied in 1933
to all General Motors cars, provides a solidly built-in ven-
tilator pane for each side window. The ventilator and the
window can be regulated, independently of one another.
Fresh air can be drawn in without causing drafts, and any
individual passenger can get as much fresh air as he likes
without disturbing his companions. Smoke and stale air are
drawn out by the vacuum created by the motion of the
car. After the division engineers designed the system, its
subsidiary, the Ternstedt Manufacturing Company, was
called upon to produce it in tremendous quantities, for the
system was no sooner perfected than it was decided to use
it on all models. Twenty-five hundred men were put to work,
Body by Fisher 295
days, nights and Sundays, and in thirty days had all the
necessary machines, tools, dies, plating units, punch presses,
polishing machines, etc., designed and produced and were
turning out 2,000 sets or 6,000 "ventipanes" a day.
Another advanced contribution is safety glass. All wind-
shields and ventipanes are made of laminated glass which
under impact may be broken without shattering. Polished
plate glass is used in all Fisher Bodies, in such volume that
the National Plate Glass Company, which they then owned,
became one of the world's largest glass manufacturers.
The metal fittings which are used in Fisher Bodies are
made by the Ternstedt Manufacturing Corporation of
Detroit, a Fisher subsidiary which takes its name from the
late Alva K. Ternstedt. Ternstedt became nationally known
to motorists in 1920-21, when Fisher introduced the Tern-
stedt window regulator, the first dependable built-in and
concealed window control for closed cars. In developing
Ternstedt to its present proportions, Fisher merged into it
three companies : International Metal Stamping Company,
Shepard Art Metal Company, and England Manufactur-
ing Company. In the Ternstedt organization, Fisher
gathered, for the first time in the history of the industry,
a complete staff of appointment engineers, designers, artists,
and modelers, prepared to fill the modern demand for
artistic harmony of design in body hardware, interior
fittings, and similar appointments.
One of the important elements to which the Fishers have
always devoted unsparing attention in the building of
bodies is the quality of quiet. When they began to build
bodies, closed cars were the rich man's toy, ridiculed as
"show cases," and seldom driven outside of cities. Even
open bodies rattled and creaked. The central problem of
body-building all along has been to increase strength and
quietness without increasing weight. Progress to the present
degree of excellence has called forth the best efforts of a
large staff of engineers.
Finally, there is the decisive quality of style. Its pursuit
begins of course with initial designs. After these have been
discussed with the car manufacturer and a choice made, a
one quarter size clay model of the car is built in the Art and
296 The Turning Wheel
Color section by skilled sculptors. This model is also care-
fully considered and changed until it suits the fastidious
tastes of all concerned. Then another model is made, and if
found satisfactory, a full-sized wood and clay model is con-
structed in the exact dimensions of the complete car, the clay
being rubbed down to the smoothness required for a perfect
finish. This is then finished inside and out according to
color schemes worked out by the Color section. In the lac-
quered body, the upholstered interior with its hardware
trimmings, one sees an exact reproduction of the car as it
will appear on the sales floor. Months pass in these elabo-
rate preparations for manufacturing the automobile as a
style vehicle.
Color has dominated automobile styling since about 1925,
when the Duco finishes made it possible to meet a public
demand for color which had already been roused by manu-
facturers in other lines. In his book, . . . and then came
Ford, Charles Merz says of this period,
. . . The invention of pyroxylin finishes had changed the raiment
of the fashionable car from dark blue or black to hues as delicate
as the pale tint of an Easter egg or as ruddy as a sunset. "The tend-
ency toward a more varied color-scheme was apparent in 1925,"
the New York Times observed, "but with the beginning of 1926
the trend toward color was seen to be a stampede."
The color obsession led to bizarre effects in motordom
for a while; later tendencies are more restrained and re-
fined. More than 800 colors were taken on by the industry
after 1923, and as a result one of the chief tasks has been
to simplify color schemes. This has been done through
analysis of the spectrum, breaking up the rainbow into its
nine steps; white, black, red, yellow, orange, green, blue,
indigo, and violet, each hue with its accompanying tints and
shades. By this means "off colors" are sorted out and thou-
sands of possibilities reduced to 450. Of these 150 are un-
suited for automobile use. The remaining 300 are possibili-
ties. By the use of Maxwell's color wheel, to which colored
discs are adjusted with certain areas exposed, it is deter-
mined just what proportion of the various primary colors is
Body by Fisher 297
required to produce a desired blend. By this means blended
colors are fixed so accurately that each can be reproduced
faithfully on each new shipment of cars. All these refine-
ments come to market in General Motors cars with Fisher
bodies.
From antiquity down to the present, style and decora-
tion have been influential in vehicle design. Excavations in
the strata of buried civilizations bring forth evidence that
the chief's chariot was as elaborately ornamented as his
shield and helmet. All through the coach-and-four period, a
man's carriages indicated his rank and fortune. The coaches
of royalty and aristocracy received the attention of noted
artists as well as of skilled craftsmen. In recognition of
their beauty, Fisher adopted as its emblem a silhouette
derived from the designs of two coaches used by Napoleon
Bonaparte, one at his coronation and the other at his mar-
riage to Marie Louise. These are among the finest examples
of coach work of the pre-automobile days and the emblem
drawn from them is one of the most significant symbols of
quality in modern workmanship. It represents the artistry
of an unhurried age which Fisher, in spite of its mechanical
prowess, holds as a standard before its staff and extends as
a pledge of quality to the users of Fisher Bodies on General
Motors cars.
The growth of Fisher Body has been phenomenal. In
fifteen years after its founding, the muster roll of Fisher
employees had grown from 300 to 40,000. Fisher built
105,000 bodies in 1914, and more than five times that num-
ber in 1924. In its twenty-five years of existence, Fisher
has produced more than 9,000,000 automobile bodies im-
pressive as emphasizing the recognition of Fisher crafts-
manship.
FISHER BODY CRAFTSMAN'S GUILD
No review of the growth and character of the Fisher
Body Corporation would be complete without attention to
the Fisher Body Craftsman's Guild.
The purpose of the Guild is to foster the ideals of true
craftsmanship among boys of high school and college age
298
The Turning Wheel
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300 The Turning Wheel
in the United States and Canada. In form and spirit it is a
revival of the picturesque workers' guilds of the Middle
Ages. Its membership today numbers 750,000 boys, in all
parts of the United States and Canada, and in the three
years since it was organized (1930), the Guild has earned
international recognition.
Fourteen leading personalities in academic and practical
engineering training serve on its honorary board of judges.
An advisory board, made up of the heads of secondary
public school systems and of leaders in manual arts teach-
ing, gives the Guild the benefit of its members' experience
in dealing with boys from twelve to twenty years of age.
In more than 2,000 high schools, in nearly 600 major
cities of the United States, the Guild is now an accepted
and approved educational activity for boys. The Y.M.C.A.
endorses and encourages it. The only recognition which the
National Headquarters, Boy Scouts of America, has ever
extended to another activity among boys is given to the
Guild. Daniel Carter Beard, National Commissioner, Boy
Scouts of America, is honorary president of the Guild.
The President of the United States, presidents, premiers,
ministers of public instruction, such personalities as Gen-
eral Baden-Powell, founder of the world Boy Scout
movement, the Governors of all the states in the Union, and
the Lieutenant-Governors of all the provinces of Canada,
commend the ideals and purposes of this institution.
The Guild for the last three years has provided an an-
nual competition in craftsmanship, in which any boy in the
United States or Canada over twelve years old and not
more than nineteen may enter. The principal awards for
excellence in this competition have been a series of four-
year university scholarships valued at $5,000 each. This
year's competition (1933—34) provides twenty-four uni-
versity scholarships, ranging from $500 to $5,000 and with
a total value of $51,000.
The subject of competition is the reproduction of a mini-
ature model of the Napoleonic coach. This tests skill, per-
severance, and patience. It also offers the widest opportunity
for skill in metal-craft, wood-craft, paint-craft and trim-
craft.
Body by Fisher
301
The Guild today has ten of its alumni, winners of first
awards, in American and Canadian universities. Five others
are fitting themselves to enter universities. In addition, the
Guild has distributed 3,220 other substantial awards for
excellence in craftsmanship.
The president of the Guild for the United States is
Mr. William A. Fisher, president of Fisher Body Corpora-
tion; for the Dominion of Canada, Mr. R. S. McLaughlin
is president.
FISHER
NOHTH AND SOUTH STRAIGHTAWAY
GENERAL MOTORS GREAT
1268 -ACRE OUT -DOOR
TESTING LABORATORY
at^Cilford, near Detroit, JWich.
302
Bonn) floiiiflB^niuBQniflMuiuDBtQHJB.uLitp B,<
GENERAL MOTORS
PROVING GROUND
Z~ J&ing
Ziuirte
3- Office and,
sAuditoriu
- (ote House
Observatory
6- Qirectorb
Residence
303
Chapter XXI
FRIGIDAIRE AND ELECTRIC
REFRIGERATION
RIGIDAIRE entered the General Motors family as a result
of one of W. C. Durant's lightning intuitions. The Murray
Body Company, long established in Detroit as automobile
body builders, organized the Guardian Frigerator Company
in 1916 as a pioneering project in the then almost virgin
field of electric refrigeration. The head of the firm told
Mr. Durant that all was not going well with Guardian.
There seemed to be a little family friction, since the Murray
boys had none of their father's faith in the enterprise. This
is scarcely to be wondered at, as the whole concept of elec-
tric refrigeration in small units for household use was still
untried, and Guardian had scarcely crept beyond the stage
of rather discouraging experiments.
Mr. Murray took Mr. Durant to the fourth floor of an
old factory building, where he found several refrigerators
in various stages of manufacture, and a most inadequate
machine equipment — two lathes, a shaper, a hand milling
machine, drill press, tool grinder, and hand tools. Three
quart-bottles sufficed for the distillation of the sulphur
dioxide used as the refrigerant. Only fifty Guardian refrig-
erators had been made and sold during the year; the con-
cern was losing money, and the elderly Mr. Murray could
see heavy losses present and to come.
It was Mr. Murray's idea that Mr. Durant should put
in new money and let Guardian continue, but this did not
suit Mr. Durant's purposes. Negotiations held fire for some
304
Frigidaire and Electric Refrigeration 305
time. Even before 1918, when he made a personal invest-
ment in Guardian, Mr. Durant told a gathering of General
Motors executives and their financial friends that here was
a babe-in-arms destined to rapid growth and likely before
many years to earn enough to pay the salaries of all the
staff at General Motors headquarters. His listeners looked
at him with amazement, yet it came to pass within ten years.
The naming of Frigidaire is thus described by Mr.
Durant. He recollects that he wrote to various of his
friends describing the new article of merchandise and asked
for suggestions. Lists of names came in from many sources
and Frigidaire, the creation of an Ohioan, was selected. It
has since become a household word in all parts of the world.
Guardian became the Frigidaire Corporation on the
eighth of February, 1919, taking the name previously given
to the product. On March 2ist following, the directors of
General Motors authorized the purchase- of the capital stock
of Frigidaire for $56,366.50, which represented the amount
Mr. Durant had invested in it, his intention from the first
having been to link it with the Corporation as soon as it
showed promise. Manufacturing continued in Detroit un-
til 1920, when the business was turned over to the Delco-
Light Company of Dayton, Ohio, created out of Domestic
Engineering Company.
The rapid growth of Frigidaire dates from this change
of base and management. Delco-Light, making individual
electric light plants for homes and farms, had already
mastered the difficult art of specialty selling. In the rede-
signing of Frigidaire, Delco-Light was fortunate in having
available the services of C. F. Kettering, now General
Motors' vice-president in charge of research, and also vice-
president of Frigidaire Corporation. Already Mr. Ketter-
ing had developed Delco equipment for automobile
lighting, starting, and ignition. For years he had been
keenly interested in electric refrigeration for rural homes,
as an adjunct of Delco-Light plants. Ever since Frigidaire's
move to Dayton he has taken a leading part in its engineer-
ing councils.
Selling at a relatively high price — $750 and up — in a
skeptical market, Frigidaire had to be pushed with
306 The Turning Wheel
determination until costs could be brought down by quantity
production. The early years developed these figures in
units sold :
1921 365
1922 2,000
1923 4,700
1924 20,000
These jumps in production reveal the influence of mass
production methods, lower prices, improved sales methods,
and the development of overseas markets. Frigidaire had
to carry the novel message of electric refrigeration directly
to the consumer, breaking down the household habits of
centuries. As the product improved, the market became
more receptive, and sharp price cuts kept public favor from
lagging. Sales mounted with dizzy speed. Meantime the fac-
tories at Dayton, operated on triple shifts, were being con-
stantly enlarged and improved by the installation of special
mass-production machines and systems. Today Frigidaire
occupies fifty-three acres of factory space.
By 1926 Frigidaire had so far outstripped Delco-Light
in sales that a separation was advisable. The present Frigi-
daire Corporation was formed, and in 1930 Delco-Light
was transferred to the North East plant at Rochester,
New York, and rechristened Delco Appliance Corporation.
In 1926 Frigidaire abandoned the wooden cabinet in
favor of sheet metal built on a wooden frame. Porcelain
was applied first to the inside of the refrigerator, but its
superiority over paint for inside finish soon brought porce-
lain to the exterior of the new metal cabinet Frigidaires.
In the present factory layout is located the largest porcelain-
enameling plant in the world.
Export sales multiplied amazingly, taking one seventh of
total production, and employing an overseas staff of 2,000
persons. Every civilized country in the world had its staff
of Frigidaire salesmen, and many lands which would hardly
be considered civilized in the ordinary sense of the word
have seen Frigidaires installed at the instance of aggressive
representatives. The export trade is still predominantly
Frigidaire and Electric Refrigeration 307
commercial, while in the United States the bulk of installa-
tions is for household use.
Household refrigeration was the first concern of Frigi-
daire, but in 1923, at the request of ice cream manufac-
turers, the company undertook to supply them with special
cabinets for their retail outlets. Since that time, partly as
a result of its ever-improving compressors, Frigidaire has
entered appropriate machines in many other fields of retail
business — groceries, meat markets, restaurants, dairies, and
florists' shops.
Electric water coolers for office buildings and factories
were added in 1926. Frigidaire builds six types of individual
water coolers and three tank types, and cooling equipment
for draught and bottled beer and other beverages. The en-
tire Frigidaire line consists of 155 different models in 19
various lines. Among these are 12 models of household
refrigerators, de-humidifiers and several types of air con-
ditioners for domestic and commercial uses as well as com-
plete air conditioning equipment for railway cars.
The last two lines represent Frigidaire's entry, in 1932,
into the new and growing business of air-conditioning, a
logical move in view of the Corporation's long experience
with electric refrigeration and its advance from small
wooden refrigerators for household use to the cooling of
large rooms for fur storage, and other extensive installa-
tions. Frigidaire engineers have already installed air-
conditioning equipment in hundreds of homes, offices, and
stores, sometimes under difficult conditions due to the fact
that the buildings were not properly designed for the pur-
pose. Their experience indicates that air-conditioning offers
possibilities fully equal to those already realized in electric
refrigeration.
Frigidaire air-conditioning equipment was selected to
provide the requisite conditions and controls for the
comprehensive allergic tests conducted at Johns Hopkins
University, Baltimore, Maryland, by Dr. Leslie N. Gay, to
determine whether high altitude conditions favorable to
hay fever and asthma victims could be reproduced in homes
and offices for the relief of sufferers.
308 The Turning Wheel
In summarizing his results, Dr. Gay reported:
The experiments in the treatment of pollen hay fever and asthma
with air-conditioned atmosphere represent a new method of attack.
Complete relief was given to patients suffering with symptoms of
hay fever, whether they occupied the room for several hours or for
longer periods of time. Striking relief was given to patients suffer-
ing with pollen asthma within twelve hours after admission to the
room. For individuals who can make provision for such atmosphere,
whether in their homes or offices, great relief can be offered.
A new refrigerant at a lower cost, Freon, odorless, non-
corrosive, non-inflammable and non-toxic under ordinary
conditions, lately developed in the research department of
Frigidaire, is expected to be a factor in all the branches of
temperature control.
At the peak of production Frigidaire employs more than
11,000 persons in its Greater Dayton plants, uses thirty-
five carloads of steel a day, consumes more silver solder
than any other manufacturer in the world, and is one of the
world's largest copper consumers. Eighteen porcelain fur-
naces operate continuously, 300,000 pieces being given
three burns each and consuming 400 tons of porcelain frit
each month. Four production lines creep through the
Moraine City plant, and there are two conveyors, each a
mile and a quarter in length, carrying materials to the
thousands of workmen stationed along the assembly lines.
The impressive technique of material movement worked out
in the automobile industry had been applied fully by
Frigidaire in its building of electric refrigerators. Refrig-
erators are given tests for temperature, in which ther-
mometer readings are taken inside the food compartment
while the cabinet stands in a room at 90 degrees, a running
test of three hours, and a noise test in a room arranged to
amplify sound hundreds of times.
The public has purchased more than half a billion dollars'
worth of Frigidaires. The 2,5OO,oooth Frigidaire left the
factory at Dayton on July 8, 1932, for a cruise around the
world and was displayed by a Frigidaire dealer in every
port of call.
Within fourteen years, the period of General Motors'
association with Frigidaire, electric refrigeration has come
Frigidaire and Electric Refrigeration 309
to be standard equipment. The evolution has been from
wood to porcelain, from complexity to simplicity of opera-
tion and repair, from small units to large, until in modern
air-conditioning one finds entire buildings under tempera-
ture control. Costs have steadily been reduced, dropping
from a minimum price of $750 in 1921 to $96 in 1933 for
a much superior but smaller refrigerator. This represents a
turnover for quantity production and intelligent sales effort
unsurpassed in any field of American enterprise.
Frigidaire is General Motors' largest producer in the
non-automobile field. Mr. E. G. Biechler has been president
and general manager since 1926 when the present Frigi-
daire Corporation was incorporated.
iiiiHiiiimiiimiimiminmmmmi
Chapter XXII
COMMERCIAL VEHICLES
M
ENTION has been made of the steam "drags" built in
England and France from 1821 on, some of which were
used alternately in towing both goods and passengers in
trailers. In America, the first power road vehicle especially
designed for goods transport was a huge steam traction
engine begun in New York City in 1858, shipped West, and
assembled there to haul goods from the Missouri River
to Colorado. It broke down on its first trip seven miles after
starting, the spot being marked by a monument at Nebraska
City, Nebraska.
Better luck attended the self-propelled "steamers" built
for fire-fighting purposes by the Amoskeag Mills at Man-
chester, New Hampshire, one of which was bought by the
City of Boston after it had been rushed there to help fight
the great fire of 1872. Hartford, Connecticut, bought a
steam fire fighter, the Jumbo, in 1876. Many other less suc-
cessful attempts to develop self-propelled fire-fighters are
on record, one having been built by the famous Captain
Ericsson as early as 1840.
Gasoline delivery wagons began to appear shortly after
the light gasoline cars proved their superiority over steam
and electric vehicles in the Chicago race of 1895. The
Langert Company of Philadelphia entered one in the Cos-
mopolitan race of 1896. An interesting early variant was
a sightseeing stage built by C. S. Fairchild of Portland,
Oregon; this carried eighteen passengers and was powered
by a kerosene engine.
310
Commercial Vehicles 311
Among the pioneers in commercial vehicles were :
Charles E. Woods of the Woods Motor Vehicle Com-
pany of Chicago, builder of light electric delivery
wagons.
Hiram P. Maxim, then connected with the Pope Com-
pany at Hartford, Connecticut.
Early motor fire engine, then largest in the world, owned by Hart-
ford, Connecticut. From Cosmopolitan Magazine, 1896
L. F. N. Baldwin, who converted a Boston horse van into
a steam wagon with a 6 horsepower engine and a side
chain-drive.
Alexander Winton, whose Winton delivery wagon was
the first gasoline commercial vehicle produced for sale
in any quantity, eight being under construction in
October, 1898.
Charles E. Duryea, also in 1898, with a three-wheel gaso-
line delivery wagon, weight 1,000 pounds.
A. L. Riker, who built for B. Altman & Co., New York
City, in 1898, electric delivery wagons which were
the first to be operated regularly by a large metro-
politan store.
312 The Turning Wheel
Electric vehicles, with the Pope and Whitney millions
behind them, had the better of their gasoline and steam
competitors in the late 'nineties, not only in the matter of
city goods deliveries, but also in cabs for hire. Electric cab
service began in New York City in 1 897, and soon after was
extended to other cities under the same financial auspices.
Electricity held the advantage for some years against the
challenge of steam and gasoline; but its prestige was
weakened in 1900 when Altman's, after three years* trial of
electrics, switched to gasoline delivery wagons. However,
only three gasoline cars were exhibited in Madison Square
Garden at the 1900 show, the first exclusive automobile
show held in America. In that year Detroit Automobile
Company, predecessor of Cadillac, introduced a most
advanced gasoline delivery wagon, unusual for its
aluminum, gun metal, and nickel axles. No market seems
to have been found for it, however. The year 1900 saw also
the founding of the Autocar Company of Philadelphia and,
in Detroit, the first step in the evolution of General Motors
Truck.
GENERAL MOTORS TRUCK
In 1900 Max Grabowsky built and sold to the American
Garment Cleaning Company a commercial vehicle, pow-
ered by a single-cylinder horizontal engine. In 1902 he
organized the Rapid Motor Vehicle Company which put
out 200 units in its first year. Moving to Pontiac in
1904, Rapid erected there the first building in America
for the exclusive manufacture of self-propelled commercial
vehicles. In 1908 General Motors acquired a majority of
Rapid Motor Vehicle stock. Shortly afterward Reliance
Motor Truck Company of Owosso, organized in 1905, also
came into General Motors, and a sales company was organ-
ized to handle the output of both truck companies under the
name of General Motors Truck Company. This company
took over manufacturing operations in 1912, and moved
Reliance to Pontiac in 1913.
Between 1900 and 1910 the gasoline commercial car
developed a decided supremacy for all-round use, but the
electric delivery wagon had made a place for itself in cities
Commercial Vehicles 313
and for light merchandise. The rout of the steam cars,
however, was complete. The light steam delivery wagon
disappeared from the market by 1905, the heavy steam
truck by 1910. Except for a few pioneers, like Rapid, which
staked everything on truck specialization, most of the trucks
produced from 1900 to 1910 were adaptations of com-
mercial bodies to stock passenger car chassis. In the next
five years of fast and furious evolution the commercial
vehicle manufacturers had settled down more or less to a
standard type "distinguished by a pressed or rolled steel
frame, four-cylinder vertical engine mounted in front,
water-cooled, with magneto ignition, three-speed selective
gear transmission, shaft and worm-gear drive to rear-axle
differential, seat back of hood and dash, left-side drive with
wheel-steering and center-control levers."
Having led in establishing some of these fundamental
principles of design in gasoline commercial vehicles, Gen-
eral Motors Truck in 1912 recognized the usefulness of
electric delivery wagons for city use by building a full line
of electric delivery wagons, which it continued until 1916.
By that time refinements in the construction of light gaso-
line cars had reached a* point at which the electric delivery
wagon business might be expected to show diminishing re-
turns. The small, light delivery wagon, adapted to a
passenger car chassis, had shown its possibilities early. Both
Cadillac and Oldsmobile had offered such delivery wagons
in 1904, the latter carrying off first prize in its class against
stiff competition in the Automobile Club of America tests.
These two manufacturers soon after went into the produc-
tion of larger cars, the light delivery wagon business going
elsewhere. But in 1917, after General Motors and Chev-
rolet came together, Chevrolet began the manufacture of
commercial units, a decision which may have had a bearing
upon the abandonment of electric delivery wagon manu-
facture by General Motors Truck.
CHEVROLET COMMERCIAL VEHICLES
The light-weight commercial car production of Chev-
rolet, which has since grown to tremendous figures, began
314
The Turning Wheel
modestly with the manufacture of 437 chassis and 40 light
delivery wagons. The commercial chassis, one-half ton with
open body, was priced at $595 f.o.b. Flint. A one-ton truck,
known at the Model T, and powered with the FA four-
cylinder motor, was introduced in 1918 at from $1,125 to
$1,320. Prices on comparable units rose with the advancing
.s
Pioneer police patrol wagon, Chicago. From Scribner's Magazine,
February, 1913
price levels until the latter part of 1920 and then began to
drop with increasing quantity production. In 1933 the half-
ton chassis, much more powerful than the original of 1917,
and powered with a six-cylinder motor instead of a four,
sold for $330, and the larger truck, capacity increased to
one and one half tons, sold for $480. During the interven-
ing period production of Chevrolet commercial units rose
steadily year by year to a peak of 344,963 in 1929, when
commercial cars represented more than 25 percent of total
Chevrolet unit production. Through the entire Chevrolet
truck experience, its commercial units have been roughly 17
percent of total production, more than 1,500,000 units hav-
ing been manufactured since 1917.
In 1927 Chevrolet undertook on a small scale to build
part of its commercial bodies, especially closed cabs; and in
1929 added a high-grade body known as the Sedan Delivery.
In 1930 it introduced single and dual wheels as standard
Commercial Vehicles 315
equipment on the heavy duty truck, and brought out a one
and one half ton truck with 1 57-inch wheelbase.
Owing to the large production necessary, securing proper
bodies for installation of Chevrolet commercial bodies had
become a major problem, leading to the acquisition in 1930
of the Martin-Parry Corporation plants in Indianapolis,
then one of the largest commercial car body builders in the
world. The formation of the Chevrolet Commercial Body
division followed, with emphasis upon advanced design,
volume production, improved material, sales control, and
GMAC financing. Since this acquisition Chevrolet's partici-
pation in the total commercial car market has steadily in-
creased from 32.7 percent of the 1930 business available in
the weight class in which it sells trucks to approximately
50 percent of the business available in 1933. The latter
figure means that Chevrolet sold approximately as many
cars in this class as all its competitors combined. In the
account of the General Motors Fleet Sales Corporation in
Chapter xxvi, reference is made to Chevrolet's sales to fleet
owners and to the government, in both of which classifica-
tions it leads all competitors by overwhelming margins.
YELLOW TRUCK & COACH
Yellow Truck & Coach Manufacturing Company, a
Maine corporation, succeeded the Yellow Cab Manufac-
turing Company, which was incorporated in the year 1910.
Yellow Cab grew out of the Walden W. Shaw Auto
Livery Company, operating taxicabs at loth and Wabash
streets, Chicago. Mr. Shaw was president, and Mr. John D.
Hertz, vice-president and general manager. Mr. Hertz
described their condition, after a disastrous strike, as bank-
rupt, $97,000 in debt and with nothing but forty battered
cars as assets. The Shaw Company and another taxicab
company, the City Motor Cab Company, were merged into
a Maine corporation on August 25, 1910.
After a year's work, the first specially designed taxicab
was completed on Christmas morning, 1914, and it was
manufactured in 1915. With its service record of 600,000
miles appended, this famous cab was shown at the Century
of Progress Exposition in Chicago in 1933.
316 The Turning Wheel
Forty cabs of this model were built during the first seven
months of 1915, and placed in service on Chicago streets
on August 2, 1915. In 1916 a small factory at 310 East
Huron Street, Chicago, with eighty workers, was turning
out one car a day. Sole ownership of the company was
acquired by the Walden W. Shaw Corporation, a New
York organization, in 1916. Three years later the Auto
Livery Company ceased operating taxicabs, confining its
activities entirely to manufacturing commercial vehicles.
Taxicab operation was continued by the Walden W. Shaw
Corporation which in 1919 became Chicago Yellow Cab
Company, Incorporated.
In evolving a sturdy taxicab, a nation-wide demand there
had been uncovered. Orders for cabs began to come in from
other cities, and production rose to twenty-five cars a day.
In 1920 the Yellow Cab Manufacturing Company was
formed to succeed the Shaw Livery Company, and a further
separation of the Yellow and Shaw interests followed in
1921. The branching-out process which we have seen so
often in automotive history began, resulting in the forma-
tion of Yellow Motor Coach Company in November, 1922,
and Yellow Sleeve Valve Engine Works at East Moline,
Illinois, within the following month. Yellow Manufacturing
Acceptance Corporation was formed in December, 1923, to
finance sales.
A merger of the General Motors Truck properties and
the Yellow interests was effected in September, 1925, when
Yellow Truck & Coach Manufacturing Company, formerly
Yellow Cab Manufacturing Company, acquired all the stock
of both General Motors Truck Corporation and General
Motors Truck Company from General Motors Corporation
in exchange for a controlling interest, now above 50 per-
cent, in the Yellow Truck & Coach Manufacturing Com-
pany.
The Yellow Truck & Coach Manufacturing Company,
through its subsidiaries, builds and sells trucks, motor
coaches, and taxicabs of a wide variety, thoroughly adapted
to the complex needs of the commercial world. The merger
brought together General Motors Truck, which had
been active in its field for seventeen years, and the leading
Commercial Vehicles
317
manufacturer of motor coaches and taxicabs. This company
continues to be one of the largest builders of commercial
vehicles, with practically all of the leading coach operators
in the United States using its equipment. A special type of
omnibus developed for the purpose was selected to provide
transportation within the grounds of the Worlds Fair of
1933. The company's products include a complete line of
trucks from one and one half tons to fifteen tons, as well as
trailers.
Manufacture of these vehicles is centralized at Pontiac,
Michigan. The General Motors Truck plant in Pontiac
which was completed late in 1927 is the largest plant in the
world devoted exclusively to the manufacture of commer-
cial vehicles.
Mr. P. W. Seiler has served as president of Yellow
Truck & Coach Manufacturing Company since 1927.
Chapter XXIII
GENERAL MOTORS IN AVIATION
G
ENERAL MOTORS made its first effective contact with
aviation during the World War, when its plants delivered
more than 2,500 Liberty engines for airplanes.1 More than
10,000 Libertys were on order from the government when
the war ended. This experience, and the Corporation's
habit of looking ahead, naturally led it to consider the
future possibilities of aviation as a peace-time industry.
An enviable record in war-time production of air-
planes had been established by the Dayton-Wright Airplane
Company of Dayton, Ohio, a 1917 offshoot of the Dayton
Metal Products Company, one of the several Dayton com-
panies already referred to as being established in rapid suc-
cession in the Ohio city by Messrs. Kettering and Deeds
and their associates. As the home of the famous Wright
brothers, first to fly a heavier-than-air machine, Dayton
had excellent reason for a keen interest in aviation. When
the war demand for planes developed, the industrial leaders
of the city promptly organized to take the lead in produc-
tion. Neither before nor since have airplanes been manu-
factured at the speed and in the quantity at which Dayton-
Wright produced them for the United States Government
during October, 1918, when an average of forty completed
planes a day were turned out. In all, Dayton-Wright pro-
duced more than 3,000 of the famous DeHaviland (DH)
fours, and 300 Standard JI training planes.
*As shown in Chapter XII: "The War Years."
General Motors in Aviation 319
During this period the liaison between the United States
Army Air Service and Dayton-Wright Airplane Company
was very close. One of the latter's Hying fields was taken
over by the Air Service, renamed McCook Field, and as
such became famous in American aviation history.
Airplane production fell rapidly through 1919, but the
long view held that eventually aviation would take its place
as a major industry. General Motors purchased substantial
interests in several Dayton companies, and acquired on
September 25, 1919, all the outstanding shares of Dayton
Metal Products Company, and Dayton-Wright Airplane
Company. The latter was re-incorporated as the Dayton-
Wright Company on December, 24, 1919, until recently a
wholly-owned subsidiary of General Aviation Corporation.
Various of its properties were turned over to other uses as
the other Dayton interests of General Motors developed,
notably Frigidaire, and Inland Manufacturing. Until the
move to Detroit in 1925 General Motors Laboratories
occupied one of the former Dayton-Wright buildings. The
Dayton-Wright Realty Company, wholly owned by Gen-
eral Aviation Corporation, was formed in 1933 to hold
title to the largest tract of land used as a flying field during
the war.
General Motors' interest in aviation revived and a con-
nection was made with Anthony H. G. Fokker. The Ameri-
can market for Fokker planes having been developed
through importations, American manufacture was begun
through the Atlantic Aircraft Corporation of Hasbrouck
Heights, New Jersey, in 1926. Atlantic Aircraft Corpora-
tion, incorporated December 14, 1923, retained its separate
status as a corporation and, until recently, was a wholly-
owned subsidiary of General Aviation Corporation.
A second manufacturing plant was established at Glen-
dale, West Virginia, Fokker Aircraft Corporation being
incorporated December 3, 1927, as a holding company cov-
ering both operations. From 1926 to 1930, 211 commercial
airplanes of nine models were manufactured, the most
popular being the Super Universal of which eighty were
delivered from January to October, 1929. There were
320
The Turning Wheel
delivered also forty-five service airplanes, all trimotor, to
the Army and Marine Corps. With these, army pilots hung
up many notable records among them :
1. San Francisco — Honolulu, non-stop flight in a United
States Army c-n trimotor piloted by Lieutenants
Maitland and Hegenberger.
2. A one-stop flight by Major Bourne in the Marine
Corps TA-I trimotor from Washington to Man-
agua, Nicaragua.
3. In an Army C-II-A trimotor, Major Carl Spatz
established the first endurance refueling record by
remaining in the air over 150 hours.
GA-43 climbing. This low-wing, all metal monoplane is made by
General Aviation Manufacturing Corporation at Dundalk, Maryland
GENERAL AVIATION CORPORATION
Shortly after the formation of Fokker Aircraft Corpora-
tion, General Motors acquired 400,000 shares of the
Fokker Common stock. In payment, General Motors turned
over all of the capital stock of Dayton-Wright Company.
The assets of the latter company consisted of McCook
Field located in Dayton, Ohio, a large number of aviation
patents, and additional cash assets of substantially $6,500,-
ooo. On May 24, 1930, the name of the Corporation was
changed to General Aviation Corporation, and operations
General Motors in Aviation 321
were consolidated in a plant at Dundalk, Maryland, leased
from the Curtiss-Caproni Corporation. On August 29,
1931, the manufacturing operation was incorporated as
General Aviation Manufacturing Corporation, wholly
owned by General Aviation Corporation, which also owned
Atlantic Aircraft, the Metalair Corporation, and the Day-
ton-Wright Company.
General Aviation Corporation was a holding company
organized under the laws of Delaware, with authorized
capital, as of June 21, 1930, of 5,000,000 shares of no par
Common stock and $1,000,000 in $25 Preferred shares. In
July, 1932, capitalization was reduced to 1,000,000 shares
of stock without par value. In April, 1933, the capital stock
was changed to $i par value per share. General Motors
owns approximately 50 per cent of the 980,900 shares of
Common stock issued by General Aviation, the balance be-
ing widely held over the country.
NORTH AMERICAN AVIATION, INC.
In April, 1933, General Aviation Corporation sold its
manufacturing interests and certain other assets to North
American Aviation, Inc., in return for approximately 43 per-
cent of the Common stock of the latter which, through
various stock holdings, reaches down to transport and
manufacturing companies in various parts of the country. In
the merger between General Aviation and North American
Aviation, ownership of General Aviation Manufacturing
Corporation, Atlantic, Metalair, and Dayton-Wright (ex-
cept as to real estate already noted) passed to North
American Aviation. As the latter already owned the B/J
Aircraft Corporation, another property located at Dundalk,
Maryland, near Baltimore, this company has been merged
with General Aviation Manufacturing Corporation. North
American Aviation owns completely Eastern Air Transport
and has substantial interests in two other transport com-
panies— Transcontinental & Western Air, Inc., and Western
Air Express — as well as in Douglas Aircraft, Inc., a manu-
facturing company. Atlantic Aircraft has since been dis-
solved.
322 The Turning Wheel
Through the merger of April, 1933, General Motors
extended its aviation interests, until it is now one of the
leading factors in both manufacturing and transport, since
North American Aviation, Inc., is one of the three largest
aviation groups in the United States.
North American Aviation was incorporated December 6,
1928, as an investment trust specializing in aviation
securities. Its authorized capital stock was 6,000,000 shares
of which 2,000,000 shares were offered for sale. On
March 9, 1932, the stock was changed from no par to
$5 par value. Later, North American Aviation became
a holding company. Its shares were changed to $i each
in 1933. In order to insure control, General Motors Cor-
poration bought an additional interest in North Ameri-
can Aviation, making the total amount of North American
Aviation stock owned by General Motors and General
Aviation Corporation in excess of 5 1 percent.
TRANSPORT
In the transportation field, Eastern Air Transport, Inc.,
formerly Pitcairn Aviation, Inc., which was formed in
1927, is a wholly-owned subsidiary of North American
Aviation. Eastern Air operates mail and passenger lines
between New York and Southern cities. On the fifteenth
anniversary of the first regular air mail contract, estab-
lished May 15, 1918, between Washington, D. C., and
New York, the New York Times cited Eastern Air Trans-
port's present competence as an example of progress in the
period. The first air mail made 75 miles an hour for 200
miles once a day, while over the same route Eastern Air
Transport now operates 18 passenger planes every hour
on-the-hour over this first route and then proceeds for
2,268 airway miles more on regular schedule.
In Transcontinental Air Transport, Inc., North Ameri-
can Aviation also owns a substantial interest. T.A.T., in-
corporated in Delaware, May 14, 1928, operated the first
combined air and rail service from New York City to Los
Angeles and San Francisco in conjunction with the Pennsyl-
vania Railroad. It ceased operations in October, 1930, con-
tinuing in existence as a holding company, owning 47.6
General Motors in Aviation 323
percent of Transcontinental and Western Air, Inc. T.A.T.
has a small holding in Western Air Express Corporation.
In Western Air Express Corporation, North American
Aviation, Inc., owns a controlling interest. Organized in
1926, Western Air Express operates mail, passenger,
and express service from San Diego to Los Angeles to Salt
Lake City, and from Cheyenne to El Paso and to Amarillo,
Texas, via Denver and Pueblo, Colorado. Western Air
Express Corporation also owns a 47.6 percent interest in
Transcontinental and Western Air, Inc.
Transcontinental and Western Air, Inc., was formed in
October, 1930, to take over as one transcontinental air
route the lines formerly operated by Western Air and
Transcontinental Air Transport, forming the shortest
GA-43: front view
coast-to-coast air route. T. & W. A. is the operating com-
pany with which Colonel Charles A. Lindbergh is identified
as chairman of the Technical Committee. Colonel Lind-
bergh laid out in 1928 for T.A.T. the line now operated
by Transcontinental and Western Air from New York to
Los Angeles.
Over the three transportation systems brought together
under North American Aviation control, 43,576 miles are
flown daily on regular schedules.
Eastern Air Transport, Inc., flies 13,500 scheduled miles
daily over the 2,493-mile airway, serving twenty-eight
cities. This company operates ten round trips daily between
New York and Washington, five of them fast non-stop ex-
press schedules and all flown by air liners carrying fifteen
to eighteen passengers. Planes of Eastern Air Transport,
Inc., and its subsidiaries have covered 18,000,000 miles.
324 The Turning Wheel
Transcontinental & Western Air, Inc., familiarly known
as "TWA," operates 23,298 miles daily over a 4,401-
mile airway from New York to Los Angeles and San Fran-
cisco via St. Louis, Kansas City and Albuquerque and via
Springfield, Missouri, Tulsa and Oklahoma City, serving
twenty-three cities on this Mid-Transcontinental airway.
Its planes have flown a total of more than 20,000,000 miles.
A fast New York-Chicago service is maintained.
Western Air Express, Inc., is one of the oldest air trans-
port lines in the United States. It flies 5,016 miles daily
from Cheyenne to El Paso via Albuquerque, to Amarillo
via Pueblo, and from Salt Lake City to Los Angeles and
San Diego, a total of 1,762 airway miles. Twelve cities are
served, and the company's planes have flown millions of
miles on schedule.
These three systems have flown more than 40,000,000
miles, carrying more than 475,000 passengers and more
than 10,000,000 pounds of mail.
MANUFACTURING
The wholly-owned manufacturing plants of North
American Aviation are located within easy reach of each
other at Dundalk, Maryland, a suburb of Baltimore, where
commercial transport planes, as well as military and naval
planes, are manufactured. The plants are modern and close
to flying fields, and front directly on the new municipal
airport now being developed, which makes the plants avail-
able to both land and water craft.
GENERAL AVIATION* MANUFACTURING CORPORATION
One series in which General Aviation Manufacturing
Corporation takes especial pride is the GA-FLB type Flying
Lifeboat of the Coast Guard. Five of these staunch seaplanes
are on duty on the Atlantic Coast, bearing the names of
stars — Antares, Altair, Acrux, Acamar, and Arcturus. After
experiments with various amphibians, the Coast Guard
decided that life-saving on the high seas made imperative
the creation of a seaplane to fill the following requirements :
General Motors in Aviation 325
An aerial "eye" capable of extended search, radio-equipped to main-
tain constant contact with surface, thus saving hours and possibly
days of delay of search ; an aerial ambulance capable of a speed of
100 miles per hour, able to land in rough sea, equipped with
hatches large enough to admit of stretcher cases and to be able to
take off in rough water ; a demolition outfit to effect the destruction
at sea of derelicts and obstructions to navigation within a few
hours after the report of location; a high speed flying patrol for
observation, landing and returning with rescued crews of distressed
small craft and capable of taking aboard fifteen or more passengers
from distressed craft and standing by for lengthy periods on the
surface, maintaining in the meantime radio communication with
surface craft until transfer can be made of its passengers.
GA-43: side view
In the United States Naval Institute Proceedings for
January, 1933, Colonel Harold C. Reisinger of the United
States Marine Corps says :
These specifications were turned over to the General Aviation Cor-
poration of Baltimore, Maryland, and the flying lifeboat was
constructed there. The finished product has by test and in actual
service lived up to the fondest hopes of its most ardent advocates.
Captain Reisinger gives several stirring accounts of
rescues effected by these ships near Cape May, which would
have been impossible without them. Perhaps the most
thrilling of the many rescues by the flying lifeboats was
that of Paul Long, saved by the Arcturus of the Miami
Station in a sea so high that its left wing was unavoidably
damaged. Thereafter the Arcturus taxied thirty miles to
shore through waves eight to fifteen feet high. The whole
record of the two flying lifeboats on the Miami Station is
one to arouse admiration and establish the utility of this
craft in its special field. In fifty-three days the two ships at
326 The Turning Wheel
Miami received twenty-seven calls, and answered all of
them successfully.
At the former B/J plant General Aviation Manufactur-
ing Corporation is also producing military and naval air-
planes. This plant is equipped with a wind tunnel with the
aid of which the aerodynamic forces on a model can be ac-
curately measured through a system of electrically driven
balance arms. From these data, predictions on the per-
formance and flying characteristics of the actual airplane
can be made.
Following the decline in demand for commercial planes,
B/J concentrated successfully on fighting craft and supplies
for the national services. In May and June, 1929, orders
were received for three experimental planes — a single-
seater Navy Fighter, a two-place Navy Observation plane,
and a two-seater pursuit ship for the Army Air Corps.
Following the building of experimental models, B/J re-
ceived production orders for twenty-five army pursuit
planes known as Yp-i6, and twenty-seven Navy observa-
tion types called oj-2 land and seaplanes, the former go-
ing to the army air base at Selfridge Field, Michigan, and
the latter to the naval air station at San Diego, where they
are being used on cruisers of the Pacific fleet.
In process of development in 1933 were a new two-place
combined fighter, and long-distance scouting plane desig-
nated as XF-2-J, all metal except for covering on the wing
and control surfaces; also an experimental single-seater
fighter known as XF-3-J, embodying the latest features in
aerodynamics and structural design, and powered with the
newest military engine.
In addition to its construction work the company con-
ducts research in aerodynamics, design and structures, its
wind-tunnel services being in demand by other manu-
facturers lacking that equipment.
DOUGLAS AIRCRAFT COMPANY, INC.
North American Aviation, Inc., also has a substantial
interest in Douglas Aircraft Company, incorporated in
Delaware, November 30, 1928, to take over the assets of
General Motors in Aviation 327
the Davis-Douglas Company (the Douglas Company from
1921), a partnership active in Western aviation since 1920.
Douglas has developed an extensive European business,
building planes specially designed for foreign use. It manu-
factures commercial and military aircraft at Santa Monica,
California, being one of the nation's leaders in military
aircraft, and owns 5 1 percent of the Common stock of the
Northrop Corporation organized in 1932.
Before General Aviation bought into North American
Aviation, Inc., the latter had become the second in point of
transport by 1932, and also held a good position as a pro-
ducer of planes. Hence, with 43 percent of North American
Flying Lifeboat of the Arcturus Class — GA-FLB
Aviation stock in its treasury, General Aviation becomes
one of the largest factors in both the manufacturing and
operating branches of aviation. Through its controlling
interest in General Aviation, the General Motors Corpora-
tion is in position to cooperate fully in the anticipated
progress of aviation, and expects to assist that development
by placing its research facilities and manufacturing experi-
ence at the disposal of its aviation affiliates. For these
reasons the recent enlargement of General Motors activity
in aviation has been hailed approvingly by the press. It
seems to be generally recognized that aviation has reached
a stage at which scientific and business assistance on a large
scale will mean accelerated progress.
328 The Turning Wheel
The New York Herald Tribune for April 27, 1933, thus
sums up the Corporation's present standing in aviation:
The broadening of this phase of General Motors activities, it is
believed, will bring to the public and to the aviation industry, both
from a manufacturing and a transport operating standpoint, the
organization, technical efficiency and experience which General
Motors has thus far given in main part to the automotive industry.
It is hoped that through the acquisition, control and coordination
of these individual units in the aviation field General Motors
Corporation will play a part in that field comparable to its devel-
opment in the motor industry.
Mr. Ernest R. Breech is president of North American
Aviation, Inc.
Chapter XXIV
THE POINT OF VIEW OF GENERAL
MOTORS
T
AH
,HE most complete statement of the point of view of
General Motors in its broad relations with stockholders,
employees, dealers, suppliers, and the public is contained in
the speech which President Alfred P. Sloan, Jr., delivered
to representatives of the automotive press at the Proving
Ground on September 28, 1927, and previously referred to
in this volume. The occasion was a three-day visit to the
Proving Ground by the automobile editors of American
newspapers, and this important gathering occurred at one
of the most interesting junctures in the history of the auto-
mobile industry.
It was a time of rising trade and yet of considerable un-
certainty, since no one could quite foresee the boiling busi-
ness thermometer of the next two years, and there were
plain indications that the industry as a whole had reached
a condition of relative stability as compared to previous
eras in which facilities for manufacturing motor cars had
been generally too small to meet the ever-growing demand.
Consequently, there was need to review the past, analyze
the present in the light of lessons learned, and restate the
principles and policies under which the Corporation would
grapple with the future:
President Sloan's speech follows, in part:.
"You of course appreciate that this industry of ours —
the automotive industry — is today the greatest in the world.
329
330 The Turning Wheel
Three or four years ago it passed, in volume, steel and
steel products, the next largest industry. This means, ex-
pressed otherwise, that upon its prosperity depends the
prosperity of many millions of our citizens and the degree
to which it has become stabilized in turn has a tremendous
influence on the stabilization of industry as a whole, and
therefore on the prosperity and happiness of still many
more of our citizens. Directly and indirectly, this industry
distributes hundreds of millions of dollars annually to those
who are connected with it, in one way or another, as
workers. It also distributes hundreds of millions of dollars
in the aggregate to those who have invested in its securi-
ties. The purchasing power of this total aggregation, as
you must appreciate, is tremendous.
"I believe that if you questioned many of your readers
as to the present position of the automotive industry, they
would tell you that it is growing by leaps and bounds. I
believe further you would sense uncertainty as to what is
going to happen in the industry when the so-called state of
saturation is reached. I do not know whether you appre-
ciate it or not, but the industry has not grown very much
during the past three or four years. It is practically stabi-
lized at the present time.
"What has taken place is a shift of business from one
manufacturer to another, and the announcements in the
press as well as the general publicity of those manufacturers
who have succeeded in increasing their business give, I
think, the impression that this is true of the whole industry.
If we could assume, for the sake of argument, that we will
reach the point at which twenty-five million cars and trucks
will be registered in the United States — an assumption that
from what we have accomplished so far is certainly per-
fectly reasonable — then I think we could safely say that
the replacement demand, plus the export demand which
will increase for many years yet, plus the normal growth,
would amount to something like four to four and one half
million vehicles a year and would require the manufacture
of a number of cars equal to or greater than has yet been
produced in any year in the history of the industry. . . .
"I am sure that I do not need to elaborate what the
The Point of View of General Motors 331
automotive industry consists of, its influence on the pros-
perity of the United States, the influence that it has had in
many other industries which contribute to its production
necessities. General Motors is an important part of this
great industry of ours and as my contribution to your visit
with us I would like to tell you in a brief way something
about General Motors ; how we are thinking, what we are
doing, and our ambitions for the future.
"Let me deal here with what General Motors includes
and with the responsibility that rests on its management.
"First. We have approximately 60,000 stockholders.1
The market value of the securities that these stockholders
hold at the present time exceeds $2,000,000,000 — a very
tidy sum. This enormous sum and the responsibility of act-
ing as trustees throws a very great responsibility on Gen-
eral Motors' organization. In 1926 these stockholders
received, in dividend disbursement, an amount in excess of
$100,000,000. The purchasing power of this $100,000,000
has an important influence on our general business situation.
"Second. We have 180,000 people in our own organiza-
tion on our pay rolls and directly concerned in our pros-
perity. I believe it can be conservatively stated that allowing
four dependents to each worker, we have approaching
three quarters of a million people whose prosperity and
happiness is directly concerned with ours.
"Third. We have our dealer organization. There are
in the aggregate something like 18,000 dealers. If we
assume, and I think we have a right to assume, that each
dealer would average twenty-five employees, I really think
it is much higher than that, we have something like 500,-
000 dealers and members of their direct organization, with
their dependents a total of over 2,000,000. I estimate these
dealers are employing a capital of over $500,000,000.
"Fourth. Next we have over 4,600 suppliers of material.
1 haven't any idea how many workers are involved in the
organization of those suppliers applicable to General
Motors production, but as you can well appreciate, it is
very large.
"Fifth. We have the enormous aggregation of people
number of stockholders increased to 372,000 from 1927 to 1933.
332 The Turning Wheel
whose prosperity depends, in turn, upon the prosperity of
those I have mentioned above — their purchasing power, in
other words. As a matter of fact, there are several cities of
importance in the United States whose prosperity is abso-
lutely linked up with the prosperity of General Motors.
"I have estimated that a very appreciable percent of the
total population of the United States is directly affected by
the prosperity of General Motors. Expressed otherwise,
the happiness of an enormous group of citizens is dependent
upon the establishment of sound principles of administra-
tion in General Motors and the development of sound
thinking in the formation of its programs and policies.
"I mention all the above to give you some appreciation
of what General Motors includes, and a better appreciation
of what our whole industry includes because, naturally, the
whole must be larger than any part. The responsibility is
tremendous, and although it is, necessarily, more or less
divided, yet the fact remains that upon a very limited num-
ber of individuals must rest the responsibility of formulat-
ing policies and principles upon which this vast enterprise
revolves and upon which its future depends.
"Recognizing the responsibility that rests upon us, I want
to deal next with certain things that we are doing that, in
our judgment, have not only contributed much to our prog-
ress, but which, in my opinion, if fully appreciated, should
add a sense of great security to those whose prosperity and
happiness is so intimately linked up with us.
"To illustrate my point, I want to tell you a true story
of what happened in General Motors in 1920.
"In the spring of 1920, General Motors found itself, as
it appeared at the moment, in a good position. On account
of the limitation of automotive production during the war
there was a great shortage of cars. Every car that could
be produced was produced — and could be sold at almost any
price. So far as any one could see, there was no reason
why that prosperity should not continue for a time at least.
I liken our position then to a big ship in the ocean. We were
sailing along at full speed, the sun was shining, and there
was no cloud in the sky that would indicate an approaching
storm. Many of you have, of course, crossed the ocean and
The Point of View of General Motors 333
you can visualize just that sort of a picture — yet what hap-
pened? In September of that year, almost over night, values
commenced to fall. The liquidation from the inflated prices
resulting from the war had set in. Practically all schedules
or a large part of them were cancelled. Inventory com-
menced to roll in, and, before we realized what was hap-
pening, this great ship of ours was in the midst of a terrific
storm. As a matter of fact, before control could be obtained
General Motors found itself in the position of having to go
to its bankers for loans aggregating $80,000,000 and
although, as we look at things from today's standpoint, that
isn't such a very large amount of money, yet when you must
have $80,000,000 and haven't got it, it becomes an enor-
mous sum of money, and if we had not had the confidence
and support of the strongest banking interests our ship could
never have weathered the storm.
uNow, as a result of that experience, which was at the
time the present administration came into the picture, we
recognized that our first duty was to obtain a proper con-
trol over the operations of this big ship. We should not be
satisfied to go along, unconcernedly, when times were good,
with no thought of the future. We should first devise
scientific means of administration and control whereby we
should be able to project ourselves as much as possible into
the future and discount changing trends and influences and,
second, that we should be prepared at all times to alter the
course of this ship of ours promptly and effectively should
circumstances develop that required us to do so. This has
all been accomplished and I feel at the present time, dealing
again with this great responsibility that falls upon our
management, that no matter what the future may bring
forth or no matter what changes may take place, irrespec-
tive of how suddenly they may take place, we have at all
times the organization and- machinery to deal with them in
such a way that the adverse effect upon the great interests
that we represent will be reduced to^a minimum.
"At the time specified, General Motors, and I think the
same applies to other manufacturers, never had any regard
for the number of unsold cars in the field. The sole idea
was to make as many cars as the factory could possibly
334 The Turning Wheel
turn out and have the sales department force the dealers
to take and pay for those cars irrespective of the economic
justification of so doing — I mean, irrespective of the
dealers' ability properly to merchandise such cars. That
was wrong and it is just as wrong in other industries as it
was in ours. The quicker merchandise can be moved from
the raw material to the ultimate consumer and the less mer-
chandise, of whatever it may consist, is involved in the
'float,' so to speak, the more efficient and more stable in-
dustry becomes.
"To my mind, one of the strongest factors influencing
continued prosperity, or expressed otherwise, one of the
strongest influences operating against a sharp reaction in
industry, is the fact' that American business today is largely
conducted on that basis. As a matter of fact, the war taught
us that lesson. The automotive industry is particularly
fortunate in dealing with large units of relatively large
value and of having direct contacts with the retailers from
whom proper statistics can be developed. In General
Motors, we receive reports from our 18,000 dealers three
times a month. These reports inform us as to the number
of cars they have on hand — usually the models they have
on hand. Also as to the number of used cars on hand as
well as the number of forward orders booked for future
delivery. Upon these reports the manufacturing schedules
that involve our 180,000 direct employees, our 4,600 sup-
pliers, and each and every one of our operations, at home
or abroad, are developed.
"The movement of merchandise into the hands of the
ultimate consumer is our fundamental index, and it should
be the fundamental index of every business to the fullest
degree possible. It is absolutely against the policy of Gen-
eral Motors to require dealers to take cars in excess of the
number they properly should 'take. Naturally, once in a
while in the closing out of a model, our dealers must neces-
sarily help us. They appreciate their responsibility, and
never object to doing so. Our policy in formulating our
production schedules is to err, if we must err, on the con-
servative side. Naturally, errors of judgment will occur, as
it is difficult to forecast the consumer demand, five months
The Point of View of General Motors 335
ahead, as we have to frequently, but we are able to come
remarkably close.
"We publish each month, in order that the whole world
may know, exactly what the movement of cars to the ulti-
mate consumer is in order that those interested in the
statistical side of American industry may take that for
what it is worth as a measure of the general business trend.
"We have developed a system whereby we forecast each
month for the current month and three succeeding months,
every detail of our operations — production, sales, overhead,
profits, inventory, commitments, cash, and all the other ele-
ments that are involved in an operation like ours. We have
developed this procedure to a remarkable degree of accu-
racy. I think it would be safe to say that all of these indices,
with the procedure we now have, are forecast within a very
close percentage. We are able, therefore, to look forward
and provide for the future with the assurance that we know
very closely at all times where we will stand four months
ahead.
"After all, everything I have told you can be expressed
in two words — proper accounting, and I now come to the
point where I want to outline to you what I believe to be a
great weakness in the automotive industry today and what
General Motors is trying to do to correct that weakness.
"I have stated frankly to General Motors dealers, in
almost every city in the United States, that I was deeply
concerned with the fact that many of them, even those who
were carrying on in a reasonably efficient manner, were not
making the return on their capital that they should. Right
here let me say that so far as General Motors dealers are
concerned, from what facts I have, I realize there has
been much improvement during the past two or three years,
but interested as the management of General Motors must
be in every step, from the raw material to the ultimate
consumer, and recognizing that this chain of circumstances
is no stronger than its weakest link, I feel a great deal of
uncertainty as to the operating position of our dealer
organization as a whole. I hope that this feeling of uncer-
tainty is unwarranted. I am sure that with a responsibility
so great, all elements of uncertainty must be eliminated
336 The Turning Wheel
and that our dealers should know the facts about their
operating position as clearly and as scientifically as we feel
that we know the facts about General Motors operating
position, just outlined.
OUR DEALERS ARE PARTNERS
"We consider our dealers partners in our business. It is
true they operate on their own account, but they are, never-
theless, partners in the sense that their prosperity is linked
up with our prosperity, and all good partners should recog-
nize the necessities of each to the other and they should co-
operate so that all weaknesses can be eliminated. This is
exactly what General Motors is doing in this connection.
We have organized a subsidiary whose sole function will
be to establish proper accounting systems wherever desired
by our dealers. We will audit such accounts periodically in
order that our dealers may have the assurance that their
records are properly established, and that the facts that
come to them are facts rather than fiction. We feel that
with the great amount of specific knowledge we have, in-
volving all phases of the automotive business, and with an
organization that specializes in this particular branch of
accounting, with nothing else to think of, we can, through
evolution and with the cooperation of our dealers, place
before them facts and figures that will indicate to them
very clearly what they should do and what they should not
do. I do not think there is anything that will contribute more
to our complete stabilization than an accomplishment of
this kind. I do not think there is anything that will establish
greater confidence in the minds of the banking interests
whose cooperation we must have in carrying on. Some time
ago I saw it stated, and I believe it is absolutely correct,
that if business, using that term in its broadest sense, were
equipped with proper accounting, a very large percentage
of the failures and losses incident thereto could be elimi-
nated. We hope to be able, in due course of time, to place
before our dealers 'bogeys/ I might say, showing the
proper relationship of each expense item to the business as
a whole with the result that if a dealer will conduct his
The Point of View of General Motors 337
affairs along the lines that we can ultimately outline to him,
he will, in a sense, take the straight and direct course to
a reasonable and fair profit.
"I have told my associates time and time again, that with
this program of ours accomplished to the degree that I am
hopeful that it can be accomplished, it will be the greatest
achievement of General Motors.
"Every once in a while my attention is called to items in
the papers that you gentlemen are publishing — statements
to the effect that this General Motors line or that General
Motors line is going to be discontinued. That is unfair to
your readers who have invested in those particular cars;
it is unfair to the dealers handling those lines, and it is
unfair to General Motors. It is unfair to you because you
want to tell the facts. I will take a few minutes to tell you
exactly what our policy is in this regard.
"It is our hope and ambition to develop a complete line
of motor cars from the low-priced group to the high-
priced group within the limitations of reasonable quantity
production. It is our hope and ambition to make each of
those lines of cars represent a greater value than anyone
else can offer. It is our hope and ambition so to develop
the confidence of the buying public in our policies and pur-
poses, as to have it feel that whatever price car may be
needed, the most outstanding value, from every point of
view, is in the General Motors line. Much has been accom-
plished in. that direction, but no one appreciates more than
I do that much more can and will be accomplished. It was
in the development of this program that we added the
Pontiac, and it was also in the development of the same
program that we added the La Salle.
"Should we feel that our line of cars at any time is, for
any reason, incomplete, we will add other lines to the end
that, from the highest price group to the low price group
there will be a General Motors car with reasonable differ-
ence in price, to fit the purse and purpose of all, and they
will all be quality cars — you may be sure of that. We will
never make the fatal mistake of sacrificing quality for
price. All that I have said means, expressed otherwise, that
there is no possibility or probability of any of the present
338 The Turning Wheel
lines being discontinued. On the other hand, they will be
expanded and improved and made more effective and more
efficient as the ability of the General Motors organization
makes this possible.
"As a result of the policy just outlined we have already
made substantial progress; we have increased the propor-
tion of General Motors' new cars registered in the United
States from one in six to better than one in three. We have
increased our retail sales during the past three years to
the point where, this year, we expect to sell at retail, in
excess of one and one half million motor cars. We have ex-
panded our business in volume during the past three years
to over $1,000,000,000 annually. Our organization recog-
nizes that there is much to be accomplished, and I am sure
that it will be accomplished. We are on our way.
"General Motors profits, like its business, have increased
rapidly during the past two or three years. In 1926 they
were something like $190,000,000. If the balance of 1927
continues along our forecast, the earnings of General
Motors during the last six months should be as good as the
last six months of 1926. I am in hopes they will be a little
better. Now, this aggregation of profits is the largest that
any corporation has ever made in times of peace and, as a
matter of fact, has ever made in the whole history of in-
dustry with the exception of a single instance in times of
war. Unfortunately, this has led to a false impression due
to a lack of understanding of the facts, that General Motors
must be making a very large profit per car. This is abso-
lutely not true. General Motors profit per car is less today
than it has been at any time except the one year in which
we made no profit or, as a matter of fact, made a loss.
"The statement that I made as to the increase in our
profit account and the statement I have just made as to re-
duction in profit per car, may appear to you to be somewhat
contradictory. I think, therefore, that I should perhaps
explain the statement a little more in detail. It is not
realized that General Motors profits come from many dif-
ferent sources. As a matter of fact, not more than half
the Corporation's profits come from the manufacture of
motor cars in the sense that other manufacturers produce
The Point of View of General Motors 339
motor cars. Our motor-car operations are, I think, equally,
if not more completely self-contained than those of com-
petitors and yet, as I said before, they contribute less than
one half to our profit account.
"You will agree with me, I am sure, that when we are
charged with the responsibility that I so thoroughly out-
lined to you, when we invest our stockholders' money as
trustees, we must do it in the firm belief that the capital is
safely invested and that the return to the stockholders, as
a result of the investment, will be fair and equitable ; other-
wise we have no right to make the investment at all. The
stockholders' investment during the past three years has
increased roughly $400,000,000. This investment carries
with it an obligation as to a return. Part of this money has
been invested in the expansion of our motor-car operations
directly in increasing capacity of existing lines and in the
establishment of the Pontiac and the La Salle, but very
large sums of money have gone in entirely different direc-
tions, viz., in expanding and establishing new activities en-
tirely independent of the motor-car operations, and some
even outside the automotive industry.
"We have $50,000,000 invested in the General Motors
Acceptance Corporation, the functions of which I will men-
tion to you later. This $50,000,000, being stockholders'
money, is entitled to make a fair return consistent with a
normal banking operation. We have tens of millions of
dollars invested in accessory operations which contribute
a reasonable return to the stockholders and, naturally, add
to the profit account. We manufacture roller and ball bear-
ings for all purposes including railroad cars; and electric
light plants for farm lighting. Through our Fisher Body
division we build our own bodies from beginning to end.
We own timber tracts and saw-mills. We carry the opera-
tions all the way from the forest to the dealer. This takes
capital, and that capital is entitled to a return, and the
return increases the total profits.
"We operate the Frigidaire, having about $40,000,000
invested. We believe the electrical refrigeration industry
is destined to be a very great industry. It goes without
saying that that has nothing to do with the automotive
340 The Turning Wheel
industry, and its contribution to the stockholders' profits
has nothing to do with the profits per motor car, yet the
support of the Frigidaire Corporation to the stockholders'
profits is very substantial, and it is increasing.
"We have employed at the present time, something like
$50,000,000 in overseas operations; in assembly plants and
in merchandising operations abroad. The stockholders are
entitled to a return on this as well as they are on other
investments I have mentioned. It is not necessary that we
should do this. We could sell our cars f.o.b. New York
for cash and have them distributed by others. In that way
we would employ less capital, but our stockholders, of
course, would not get the return. The advantage of doing
it our way is that we can do a bigger and better business.
We can reduce the price of the cars in overseas countries.
We therefore sell more cars and we can make all the
cars at a lower cost in consequence. We can also paint and
trim the cars more to the liking of the people in those
countries. We employ labor and purchase material in those
countries, and in that way we make ourselves more a part
of the industrial life of each country. What is the result?
A good return on the additional capital employed for the
stockholders; an increase in the volume of business, mean-
ing additional profits; a lowering of the cost of all cars
produced, hence greater value at both home and abroad.
All concerned are benefited.
"I might go on further and point out to you many other
activities that we have that are very seldom thought of,
all of which must make a return. Still in addition to this,
and it is an important consideration, through our growing
production necessities we are required to make more and
more of our own parts. We can usually make them better
and at a lower cost. It is not, however, our policy to do
this unless we can get such results, but where we can add
value to our cars and make a reasonable return, we feel it
is our duty to the responsibility we carry to do this. For
all additional capital General Motors employs in extend-
ing its operations, other things being equal, there must be a
proportionate increase in profits. Each dollar must make
a showing for itself. If, for illustration, $100,000,000 were
The Point of View of General Motors 341
left in the business out of a given year's earnings, and a
reasonable return on that $100,000,000 is 15 percent, then
the next year's profits should increase, all things being
equal, by $15,000,000 or we will not have done a con-
structive thing.
"A few words about our organization itself. We operate
on the principle of what I might term a decentralized
organization. I mean by that, each one of our operations
is self-contained, is headed by an executive who has full
authority and is responsible for his individual operation.
We, naturally, think that this is the best scheme of organ-
ization or we would not adopt it. Our responsibilities are
so great, the necessity of quick action and prompt decision
is so great and contributes so much increased efficiency and
effectiveness, that it is about the only way a business of the
magnitude of General Motors could be conducted. It also,
I think, has the very great advantage of developing
executive ability and initiative on the part of a greater
number of individuals. All the members of our organization
appreciate what is absolutely true — that they have a real
function to perform and that upon their initiative, their
industry, and the constructiveness of their decisions as a
whole, depend the success of the institution as a whole.
Coordination is effected through what we call Inter-
Divisional Relations Committees, where those interested
in the same functions of the important divisions meet to-
gether and discuss their own problems as well as the same
problems from the standpoint of Corporation policy. For
instance, our purchasing agents meet together in the form
of a General Purchasing Committee, presided over by a
vice-president of the Corporation. If it is found that one
or more of the divisions can profit by purchasing as one
unit, then we purchase as General Motors and all profit.
If it is found that there is nothing gained, we do not do so.
In that event the purchase is by the individual operations
as their judgment may determine. In that way we get in-
dividual initiative, and at the same time we do not overlook
anything from the Corporation standpoint.
"In addition to this, the Corporation maintains an or-
ganization in Detroit as an advisory service for the benefit
342 The Turning Wheel
of all. General Motors Research which you have visited,
acts in a consulting capacity for the engineering depart-
ments of all the divisionss and IR addition to this, is con-
stantly searching for new principles and ideas of a more
fundamental and scientific character than would be pos-
sible for any of the individual engineering departments,
which must be more concerned with immediate production
problems. Legal and patent problems, as well as account-
ing and financial control, are handled in a similar manner.
Sales research is also a very important activity. In no case,
however, is the responsibility taken away from the head
of each division. When differences of opinion arise, and
differences of course do arise, they are discussed and con-
sidered from every standpoint. In every case that I can
remember since I have been operating in the past three
years, as a result of such discussion, everybody was agreed
as to the proper course to pursue.
"Some months ago, I sent a message to our stockholders,
entitled, 'How Members of the General Motors Family
Are Made Partners in General Motors/ In this I explained
the attitude of General Motors toward its organization —
those who make it what it is, and what it will be in the
future. I shall be glad to send any of you a copy of that
message. After all, the tens of millions of dollars we may
have in banks, the hundreds of millions of dollars invested
in various ways, our plants and their equipment through-
out the world, all are of comparatively little value without
an intelligent and effective organization. It is easier to re-
place all the former than it is the latter. We have recog-
nized that principle by developing plans whereby the
organization itself profits through its own endeavors as
partners — in other words, receives something in addition
to a daily wage. This applies to one and all. Time will not
permit me to go into detail. I just want to say that I believe
that this principle of the organization's participation in the
result that they themselves accomplish is not only sound
economically and equitably, but is the best kind of business
from the stockholders' standpoint.
"A word about our policy of telling the facts about Gen-
eral Motors. We believe in frankly telling our stockholders
The Point of View of General Motors 343
and the public all the things that we can consistently. As I
have already said, we report monthly our retail and whole-
sale sales so that everybody may know. We send quarterly,
to our stockholders, detailed statements of the financial
position of General Motors as well as its operating posi-
tion. I make it a point to send messages several times a
year to our stockholders, telling them of things that we are
doing and why we are doing them so that they will get a
complete understanding of our viewpoints. In our annual
report we try to state all the facts the stockholders should
know. We knowingly hold back no information that they
are entitled to as partners in the business. I feel that this
policy on the part of General Motors has contributed much
to the feeling of good-will that exists toward the Corpora-
tion, not only throughout this country, but throughout the
entire world.
"The story I told you about the position of General
Motors in 1920 and my viewpoint of the greatest necessity
in our dealer situation, leading up to the two words —
Proper Accounting — might be expressed in still another
way, this time in three words : — Get the Facts.
"There is a very fundamental principle, the importance
of which I am continually trying to impress upon our direct
organization as well as our dealers; viz., Get the Facts.
"I would now like to tell you some of the things we do
in General Motors to get the facts.
"Let me tell you about what we call our field trips. It
may surprise you to know that I personally have visited,
with many of my associates, practically every city in the
United States from the Atlantic to the Pacific and from the
Gulf of Mexico to the Canadian border. If any of you
has done this, you realize what a big country it is. It has
taken weeks and weeks of the hardest kind of work and
continual travel to accomplish this. I wish that my duties
were such that I could do more of it; and I am trying to
arrange my affairs so that I can. In these trips I visit from
five to ten dealers per day. I meet them in their own places
of business, talk with them across their own desks and
solicit from them suggestions and criticisms as to their re-
lations with the Corporation; the character of the product;
344 The Turning Wheel
the Corporation's policies; the trend of the consumer de-
mand; their viewpoint as to the future, and many other
things that such a contact makes possible. I solicit criticism
of anything and everything. I make careful notes of all the
points that come up that are worth while, and when I get
back home I study and develop those points and capitalize
them so far as possible. The reason for all this is that
irrespective of how efficient our contact through our
regular organizations may be, our men in the field are
charged with doing specific things and that takes all their
time and effort. I go out from the standpoint of general
policies and get the facts in a very personal way without
the intermediary of an organization, which is apt to over-
look the most important points and inject its own personal
views on such points as it does get. I believe that this work
that we have done has contributed much more than any of us
appreciates to the progress that General Motors has made.
"You have gone through our Research Laboratories and
have some idea of what it is all about. It is no different
from our field trips, in principle. We are searching for the
facts that we may know more about the fundamentals and
be able to add value to the performance and effectiveness
of our products, just the same as in the field work we are
trying to learn more about the distribution of our products.
We send representatives abroad to study foreign methods
and foreign cars. We have an engineering office in London
with representatives in other countries to keep us advised
at all times as to what progress there may be along Euro-
pean lines that General Motors can capitalize. Again, we
are seeking the facts.
"The Proving Ground here is also dedicated to the prin-
ciple of getting the facts. As you see, we not only operate
our own cars, but all competitive cars, both those made at
home and abroad. We are seeking the facts about all of
them to the end that General Motors cars are better cars.
We are seeking in our sales activity here at the Proving
Ground to impress upon our dealers the facts about our cars
so that they may more intelligently present them to the con-
sumer.
The Point of View of General Motors 345
"I wish I could get a definite measure of the relationship
of the various things we have done, one to the other, and
their contribution to the whole, but, naturally, a thing of
that kind is impossible. I feel, however, that certain prin-
ciples which we have developed are important factors in
the progress we have made. One of these is that we have
tried to treat everybody fairly and squarely. We have tried
to recognize that our organization, which is contributing
everything to the success of the Corporation, is entitled to
participate in that success — our partnership idea. We have
also tried to recognize the position of our suppliers. Of
our dealers I have already spoken. As to the public, you
only have to compare any General Motors product of to-
day and its price with the corresponding product of even
two years ago and the price at that time: more beauty in
design; more luxury in appointment; more comfort and
convenience; increased performance at, in nearly all cases,
a lower price. In other words, greatly increased values. We
have worked conscientiously and intensively, always with
the interests of our stockholders as our guide. Naturally,
we are not perfect in carrying out these policies and
ambitions of ours, but we do the very best that we can and
feel that we are continually making improvement. There-
fore, the first factor I believe should be trying to treat
everybody fairly and squarely. Then we are trying, as I
said before, to get the facts. My experience in business is
that facts are too little considered in making decisions. It is
difficult to get the facts — to get all the facts, but it is worth
every effort and we put forth that effort. Then, with the
facts before us, we try to approach the decision with an
open mind.
"We recognize that we must be conservative. Our re-
sponsibilities are too great to be otherwise. We cannot take
chances, yet we must progress. We try to recognize that
what we do today, whatever measure may be placed upon
it, must be improved tomorrow; next week's performance
must beat tomorrow's, and next month's and next year's
must beat that of the previous month or year. Therefore,
to sum up, we get these factors : a recognition of the equities
of all concerned; getting the facts; analyzing the facts
Weather Bureau Station, General Motors Proving Ground,
Milford, Michigan
Entrance to General Motors Proving Ground, Milford, Michigan
346
The Point of View of General Motors 347
with an open mind. These, to my mind, are the principles
which have contributed most to the present position of Gen-
eral Motors and to the progress that it has made during
the past few years. This leads me to the last point — the
necessity of capitalizing the principles that we elected to
guide us forward. This can only be accomplished in one
way: hard work.
"It seems sometimes — each one of you has seen such
cases — that results are accomplished without hard work, but
I think you will agree with me that in the long run it does
not work out that way. In any event, I hope that General
Motors will never attempt that sort of an experiment.
"Therefore, our principles completely expressed, as I see
them, and they apply to every other business as much as
they do to that of General Motors, are: Get the facts.
Recognize the equities of all concerned. Realize the neces-
sity of doing a better job every day. Keep an open mind
and work hard. The last, gentlemen, is the most important
of all. There is no short cut."
Chapter XXV
THE STOCKHOLDER INTEREST
I
N DISCUSSING the purchases of interests in other com-
panies, it was noted that in most cases General Motors
followed the practice of buying all or part of the agreed
shares in the open market, with the result that a number of
purchases were completed without changing the stock struc-
ture of the Corporation even though the purchase agree-
ment was stated in terms of stock.
After the General Motors Corporation succeeded the
General Motors Company on October 13, 1916, only in the
following cases was Common stock originally issued in the
acquisition of properties :
$IOO PAR COMMON STOCK
ADDITIONAL
SHARES
DATE ISSUED FOR STOCK OF
May 2, 1918 282,684 Chevrolet Motor Co. of Delaware
Nov. I, 1918 49,000 Canadian Units
Dec. 31, 1918 99,401.7 United Motors Corporation
Dec. 31, 1918 16,175 Lancaster Steel Products Co.
Oct. 31, 1919 35,451 Domestic Engineering Co.
Mar. 25, 1920 21,457 Dayton Metal Products Co.
504,168.7
348
The Stockholder Interest 349
NO PAR COMMON STOCK
On March 25, 1920, 140,000 shares of no par stock were ex-
changed for all capital stock of the Chevrolet Motor Company of
California.
As of June 30, 1926, 638,401 new no par shares of the Cor-
poration were issued as part payment for the minority interest of
Fisher Body Corporation.
In the foregoing, and other purchases, there were issued
390,708 shares of 6 percent $100 par Debenture stock and
60,000 shares of 7 percent $100 par Debenture stock. The
last instance of this nature was in October, 1929, when
40,000 shares of 7 percent Preferred stock were issued as
part payment in the acquisition of the North East Electric
Company.
The era of prosperity began for the Corporation in
1923, when net sales reached a new high level, nearly
$700,000,000 — earnings on which left $65,121,584 avail-
able for dividends on Common stock, the largest earned for
Common stockholders up to this time. Of this $24,772,026
was paid in dividends, and more than $40,000,000 re-
invested in the business. The dividend on the Common no
pa'r stock had been raised to 30 cents a quarter on March
15, 1923, and was continued at that rate through the year.
This increase in dividends reflected both the growing
prosperity of the country and its increasing acceptance of
the automobile as a commonplace, a piece of property so
widely owned that to be without one was to be out of
fashion. All trades catered to the motorist. Dry-goods
stores had added motoring accessories, sport clothes, and
blankets. Hardware stores carried flashlights and tools.
Automobile supply stores were growing in number and
size — a new development in merchandising. Hotels found
a new and profitable business in the motor traveler. The
farmer started wayside markets to reach the city dweller.
A parts and accessory business had brought by 1923 a turn-
over in excess of $1,750,000,000 through retail trade, when
clothing and other motorist supplies are included.
Also, an intense stimulus had been given to the search
for substitutes, for new sources of raw materials and the
350 The Turning Wheel
development of by-products. A particularly noticeable in-
stance was gasoline, which was originally the by-product of
petroleum, while kerosene was the mainstay. The motor
industry reversed their positions and built a far greater
industry out of the formerly unimportant by-product.
"Countless similar situations might be added by a detailed
and careful analysis, all weaving closer and closer the vital
and mutually advantageous relationship of the automo-
bile and allied trades and industries." The motor car had
become an essential of life for the American masses.
On June 16, 1924, the certificate of incorporation was
amended to provide for a reduction in the number of no par
Common shares, one share of new no par value Common
stock being given for each four shares of no par Common
stock then outstanding. This reduced the number of shares
outstanding from 20,646,397 to 5,161,599. At the same
time holders of the 6 percent Debenture and 6 percent Pre-
ferred stocks were given the right to exchange their stocks
for a new issue of 7 percent Preferred stock, on payment of
$10 per share in cash. The new Common stock after the
exchange of one new share for four old shares, registered
high and low prices of 66% and 55 ^4 in 1924, but the next
year saw it rise to a high of 149^4. This stock soared to
282*4 m X927> becoming the leader in the remarkable
"bull" market of that hopeful year.
Both sales and earnings dropped somewhat in 1924. An
initial dividend of $1.25 on the new Common stock, each
share of which represented four shares of the old no
par Common, was paid December 12, 1924. More than
$19,000,000 was reinvested in the business. The Corpora-
tion's solid position, the greater market appeal of the new
and higher-priced stock, and the flourishing condition of
the country, all combined to focus attention on General
Motors Common. When it was seen that the disposition of
the directors was to pay in dividends roughly two thirds of
earnings to Common stockholders, the market hesitation on
the stock ceased. From 1924 through 1929 disbursements
to Common stockholders ranged from 56.4 percent of avail-
able earnings to 65.6 percent. With the decline of earnings
in 1930, the ratio rose because of the Corporation's decision
New York headquarters of General Motors, 7775 Broadway, as seen
from Central Park across Columbus Circle
351
352 The Turning Wheel
to maintain dividends as part of a policy to reinforce the
general buying power of the public, a determination which
increased the number of its stockholders all through that
discouraging period.
Mr. Raskob, as chairman of the Finance Committee,
exercised a great influence on the Corporation's dividend
policy. A hopeful and sanguine man, he firmly believed that
prompt and liberal distribution of earnings to stockholders
not only tended to maintain general prosperity, but also
that it made future markets for General Motors cars by
increasing directly the buying power of those already well
disposed to the Corporation's products by stock owner-
ship. The various stock "split-ups" and stock dividends
were motivated by the reasoning that the more persons
financially interested in General Motors, the greater the
number of potential customers, since, other things being
equal, they would be disposed to prefer General Motors
products to those of other manufacturers.
Sales for the year 1925 showed a decided increase, net
income available for dividends exceeding $100,000,000 for
the first time in General Motors history. Accordingly,
extra dividends were paid on Common stock, $i on Sep-
tember 12, 1925, and $5 on January 7, 1926, and the
regular quarterly dividend rose to $1.50. Notwithstanding
these disbursements, the then record sum of $46,441,065
was reinvested in the business. The liberal investment
policy being based on a financial position of increasing
strength, the investing public pushed the price of the new
no par Common stock from a low of 64^, to a high of
149^4 during the year.
A Common stock dividend was declared on August 12,
1926, at the rate of one half share of Common for each
share outstanding. This change in the capital account
raised the outstanding shares by 2,900,000 to a new high
of 8,700,000 for the no par issue of 1924. Cash dividends
for the year reached the then record of $103,930,993. Not-
withstanding, almost $75,000,000 from earnings was re-
invested in the business. It is noteworthy that in 1926
General Motors paid in dividends a sum in excess of its
net sales in 1915.
LAMMOT DU PONT
Chairman of the Board of Directors, General Motors Corporation,
1929
353
354 The Turning Wheel
An important change in the Corporation's capital
structure, approved by the directors on August n, 1927,
was adopted by the stockholders on September I2th, in-
creasing the authorized Common stock from 10,000,000
no par shares to 30,000,000 shares of $25 par value. Two
shares of the new $25 stock were issued for each of the no
par shares, which resulted in increasing the number of out-
standing Common shares from 8,700,000 to 17,400,000.
During 1926 the Corporation had put upwards of $100,-
000,000 into plant extensions and improvements, and in
permanent investment in subsidiary companies. A portion
of these expenditures was now permanently financed by the
issue of 250,000 shares of 7 percent Preferred stock at
$120, the marketing of the issue being taken over by
J. P. Morgan & Company. Both the premium paid and the
favorable rate at which the famous Morgan house under-
took their distribution reflected the Corporation's favor-
able financial position.
From earnings of 1927 more than $90,000,000 was re-
invested in the business. Cash dividends on the Common
stock reached a new high at $134,836,081, $8 being paid
on the old no par stock through the medium of three
quarterly $2 dividends and an extra of $2 on July 5th. An
initial quarterly dividend of $1.25 on the new $25 par
Common was paid on December I2th with an extra of $2.50
on January 3, 1928. This was the equivalent of $15.50 on
the old no par stock which closed its extraordinary market
history on October 8, 1927, with a high record of 282%,
after being quoted four years earlier at 55%. Since the
number of shares had been doubled, the market price of
new stock was reduced, but during the next three years ran
from a low of 1231/2 to a high of 224^.
In 1928 when the American motor-car industry as a
whole reached the new high of 4,601,141 units in produc-
tion, General Motors sold 1,810,806 cars and trucks. Total
sales were $1,459,762,906 and net income available for
dividends $276,468,108, the highest in the Corporation's
history. Its percentage of the total passenger car business
was 41.4. Dividends reached an all-time high, with a dis-
bursement of $165,300,002 on Common stock, and more
The Stockholder Interest 355
than $100,000,000 — the largest sum to date — was rein-
vested in the business. The stock reflected these tremendous
earnings and disbursements by reaching a new high of 224^4.
As prices in that elevated range were rather beyond the
reach of small investors whom the Corporation desired to
attract, stockholders were asked to approve an amendment
to the certificate of incorporation effecting the exchange of
their $25 par stock for a new issue with a par value of $10,
thus increasing the number of outstanding shares two and
one half times. This was done on December 10, 1928, the
exchange of stock beginning on the January yth follow-
ing. On the completion of the exchange, the Common stock
outstanding was 43,500,000 shares of $10 par value and
no further change has been made. The highest quotation
on these shares was 91 J4 m 1929.
The year 1929, indeed, recorded new highs in many
aspects of the Corporation's activities. In that year the
Corporation made these records:
Unit Sales 1,899,267 passenger and commercial cars
Sold $1,504,404,472 worth of merchandise
Earned $248,282,268 available for dividends
Paid $156,600,007 in dividends on Common stock
to 198,600 stockholders
Reinvested $82,203,580 in the business
Pay Roll $389,517,783
Employees 233,286
Bonuses 167,378 shares of Common stock
Its employees had $56,560,310 balance in the Employes' Savings
Funds, and
$38,762,678 balance in the Employes' Invest-
ment Funds
Its car divisions made unit sales to dealers as follows:
Buick, 199,414; Cadillac, 15,416; La Salle, 21,498; Chevrolet,
988,191 passenger cars and 344,963 commercial cars; Pontiac
356 The Turning Wheel
(Oakland), 224,448; Oldsmobile, 99,435. Including all cars and
trucks, total unit sales were:
Passenger cars 1,554,304
Commercial cars 344,963
Total unit sales 1,899,267
From 1930 to 1933 the Corporation's record was one
of meeting adverse circumstances as effectively as possible,
maintaining a strong cash position in the face of shrinking
volume and, through improvements in the design and
workmanship of its products, striving to stimulate consumer
interest. Declines, sharp when compared with the figures of
1922-30, appeared in sales and earnings. The latter years,
however, do reflect a rise in the percentage of the total
automotive trade enjoyed by the Corporation.
Also in gratifying contrast to declining sales, was the
rise in the number of stockholders in the Corporation. The
year 1929 witnessed a notable increase in stockholders, the
number rising from 71,185 in the last quarter of 1928 to
198,600 in the last quarter of 1929. Since then the gains
have been large. The figures for the last quarters of the
past four years are:
1930 263,528 stockholders
1931 313,117 stockholders
1932 365,985 stockholders
1933 351,761 stockholders
The rise may be explained partly by the Corporation's
strong cash position, the evident determination to maintain
it, and the policy of paying out of surplus such dividends as
did not threaten that position. Large blocks of stock became
broken up under the financial pressure of the period and
passed into small and scattered holdings.
By rigid economy the Corporation has escaped record-
ing a loss from operations. Although margin of profit de-
clined, cash and cash investments increased, reduction of
inventories accounting largely for this increase in cash.
Decisively the Corporation grappled with the problem of
readjusting its idle real estate, plant and equipment account
to salvage value, thereby eliminating the need for charging
The Stockholder Interest 357
depreciation against this property. Consequently, the annual
depreciation charge is reduced by some $7,000,000 a year.
The Corporation's forecasting experience stood it in good
stead as was shown fairly early in the depression, when
the necessary steps in retrenchment were taken and produc-
tion was effectively controlled.
On May 26, 1930, the stockholders, to simplify its senior
security structure, voted to replace outstanding senior securi-
ties by a new $5 series Preferred stock, exchangeable on
the basis of 1.35 shares of the new $5 Preferred for each
share of the 7 percent Preferred, 1.15 shares for each
share of 6 percent Debenture stock, and i.io shares for
each share of 6 percent Preferred stock. General Motors
enjoys the unique record in the twenty-five years of its
existence of never having passed a dividend on any of its
senior securities, of which 1,875,366 shares of its $5 Pre-
ferred stock are all that are presently outstanding.
As the business skies began to clear in the spring of 1933,
elements of strength at once appeared. Stocks of cars were
so low that even a limited new demand caused factory
activity. For the first time in the history of the Corpora-
tion, June sales exceeded May sales, and the period of brisk
summer buying continued longer than usual. Moreover, by
maintaining dividends to an ever increasing body of stock-
holders, without sacrifice of internal strength, the Corpora-
tion had commended itself to a large and important public.
The essential soundness of its management and the solidity
of its financial position had been demonstrated under the
most severe financial strain ever experienced by modern
industrialism.
Buick on steps of Summit House, Pike's Peak, 1913. First car to
climb the mountain entirely on its own power
358
Chapter XXVI
MARKETING THE MOTOR CAR
J7 ROM its birth the automobile has been a public spectacle,
a self-advertising piece of merchandise, performing in the
gaze of all. Whenever a new car took the road in the old
days, a crowd gathered to praise or criticize. Even yet a
new model at the curb attracts passers-by. Thousands pay
admission to automobile shows, and changes in design in
well-known makes are accepted by press and public as out-
standing news. But even so, automobiles have to be sold;
the salesman has to get his order signed.
Old-timers say that for the first fifteen or twenty years
of this century, automobiles sold themselves. That is true
only in the sense that fewer cars were being built than the
public was ready to buy. Nevertheless, there were sales
problems. One was the early timidity of the public; an in-
dividual might want to buy and be quite able to buy, but his
fears had to be overcome. Would the car run, and could
he operate it? In such cases, salesmanship was largely a
matter of demonstration. The salesman took his prospect
for a ride, selecting a course on which excellencies would
show and faults be overlooked. If the car was a good hill-
climber, hills would be negotiated; otherwise the talk would
be of speed on level stretches. With cars of substantial
reputation, like Buick, demonstrating the car remained the
central effort down to about 1918. Once the car had been
demonstrated successfully, the prospect paid a deposit and
the dealer entered his name on a waiting-list for future de-
livery. Many buyers were willing to pay premiums for early
delivery.
3S9
360 The Turning Wheel
But even in those years the manufacturer had his selling
problems. First in the quantity field, R. E. Olds had to meet
the problem of credit sales. Nearly everything hitherto
manufactured for the public and sold through middlemen
had been purchased on credit. Retailers did business partly
on the capital of manufacturers and wholesalers, and in turn
sold to many of their customers on open account. There
were special reasons why this practice could not be fol-
lowed with regard to automobiles. Manufacturers could not
find capital enough to finance their trade on that basis. Each
unit represented so much money that credit risks could
hardly be taken. Cars depreciated rapidly in use, and at the
start could hardly be considered as dependable, standard-
ized merchandise. Consequently, Mr. Olds insisted upon
shipping with sight draft attached to bill of lading, a cash
transaction as far as the factory was concerned, since banks
would finance goods in transit upon bona fide orders. That
practice has been generally followed, though liberalized, as
will be described later.
Under this system the dealer had to furnish all the capi-
tal and credit required to stock the car pending sale, and
finance his deals. If a man of some means and substance, he
could usually use local bank capital to pay his drafts and
take over his cars from the railroad, but in many places
banking facilities were meager, and bankers timid. So the
manufacturer had to choose his dealers with an eye to their
general credit as well as their selling ability. The seasonal
character of the business made the dealer's ability to finance
in advance of sale highly important to the manufacturer.
March, April, May, and June were the best months for
deliveries, but with limited facilities for manufacture, pro-
duction had to proceed at a steadier pace. Unless the
waiting-list was extra long, the factory could operate
profitably only if dealers had credit enough to take cars in
the winter months for storage in a reasonable quantity. In
a vast marketing area like the United States, the inability
of even 10 percent of the dealers to do this might be em-
barrassing. Therefore, although cash was the rule, credit
qualifications had to be considered by the manufacturer.
Marketing the Motor Car 361
Various efforts were made to take short cuts to the
market when not enough strong dealers could be found to
give a manufacturer adequate representation in all sections.
The factory branch store was one method which has been
tried by nearly every leading manufacturer. At one time
Chevrolet had over fifty of these stores, but found it ad-
visable to abandon all but a few. The Buick branch in New
York City outlived all its comrades. Also, distributorships
were set up for large territories, a natural evolution in view
of the time involved in rounding out a system of national
representation on the basis of contracts with individual
dealers. Some manufacturers operated sales zones on their
own account; others allocated territories to independent
individuals and firms. Some of the latter have been highly
influential in the history of General Motors. An excellent
example is Harry K. Noyes of Boston, Buick branch man-
ager and distributor for New England for more than
twenty-five years. In several other parts of the country con-
tinuity records of almost equal impressiveness have been
made. Successful distributors often reinvested their profits
with their dealer-customers, acquiring part ownership, and
in some cases full ownership of important retail outlets in
their territory.
In a trade of rapid growth and immense vitality, dealer
arrangements are necessarily flexible, adjusting themselves
to the needs of the territory and the business and financial
capacity of the dealers. Hence sales policies which were too
rigid to let the human element expand and flourish on the
local side have usually come to grief. One of the early prob-
lems was to find and secure as dealers and distributors men
who would keep on growing as the industry grew.
Despite the policy on the manufacturer's part to con-
tract with substantial parties, the early dealers were usually
men of more courage than capital. They had to be cour-
ageous, since they were staking everything on their faith in
a new business geared to a scale of values beyond anything
else ever taken to the market in quantity. In 1908 a good
automobile cost as much as a small house; the difference was
that banks, building and loan associations, and mortgage
companies were solidly behind real estate, while the
362 The Turning Wheel
automobile dealer had to finance his operations on his own
responsibility. At the start he usually operated "on a shoe-
string," until profits gave him a firmer base and longer line of
credit. As a result, the survivors of these adventurous begin-
nings, now well along in years, still have the hearty air of men
who in their youth grappled gayly with fortune, taking good
luck with a grin and bad luck with a smile. They fought for
public acceptance of the automobile ; upon their ability to con-
vince all classes of buyers the new industry depended for the
introduction of its products into areas as yet unprepared for
it by advertising, good roads, or service facilities.
In New England Harry K. Noyes would break a trail
over a mountain, sell his car, establish a dealer, and make
his way back to the railroad in an ox cart. In Minnesota,
Harry Pence would lead a string of Buicks westward
through the mud and never think of returning until the last
one had been sold. He might take wheat or potatoes in
trade, but he sold the caravan and returned to Minneapolis
for more. As one veteran said :
We were business buccaneers on uncharted seas; we would gamble
with anything except the good name and fame of the cars we were
selling. I have risked my life more than once making demonstra-
tions on hill roads and hairpin curves that I had never seen before.
There wasn't the same uniformity in cars that there is now, and
because one performed well that was no guarantee that the next one
would. If it failed and we survived, we always had plenty of
reasonable explanations on tap, made repairs at the nearest black-
smith shop and returned for another try. I made it a point of honor
for years never to let go of a man who seemed to me to be the
best dealer material in his community. Sometimes I had to wait
years to get him, taking someone else in the meantime. But if the
second choice didn't make good after giving him every chance and
encouragement, back I would be after number one.
We didn't know so much about General Motors then. We were
Buick men or Cadillac men or Oldsmobile men, whatever the
hook-up. That is still pretty much true in the field, but then we
were treading on each other's toes all along the line, since less
attention was paid then to keeping General Motors cars out of
direct price competition with one another. That was just as well,
for it kept us on our mettle at a time when our futures depended
Marketing the Motor Car 363
upon building the best dealer organizations possible, and our
dealers likewise needed to reach and cultivate the best clientele in
their neighborhoods. Later on, when our expenses of doing business
were larger, and the market was less demanding, we welcomed the
effort of headquarters to keep General Motors cars in price classi-
fications where competition between them became marginal rather
than general.
The first motor cars were offered to the public without
top, windshield or lamps, and were serviced by black-
smiths or buggy builders. Dealers had to stock necessary
equipment, create service organizations, and organize
supply stations. A pioneer salesman invading new territory
made it his business to talk country storekeepers into stock-
ing gasoline, and to urge upon the livery-stable keeper the
wisdom of providing accommodations for motor cars as
well as for horses and carriages.
Fairs bulked large in the early sales efforts. The first
motor cars were denied admittance to these gatherings, but
that prohibition soon passed, and presently whole buildings
came to be set aside for automobile displays. To Bar-
num & Bailey goes credit for breaking down the barrier
against automobile showmanship in many backward parts
of the country. During the entire 1896 season, Barnum &
Bailey street parades were led by an automobile, and the
public applauded its appearance in the ring twice daily.
Within a few years the automobile industry would be
putting on its own shows or fairs in all the large centers.
As the trade developed, this practice spread downward until
the automobile show has become an annual feature in most
county-seat towns. New York and Boston led off with auto-
mobile shows in 1900, following the precedents set by
annual cycle shows. In showmanship, as well as in mechanics,
the automobile trade owes a considerable part of its early
momentum to the bicycle trade. By an easy transition firms
making bicycles and bicycle parts began to make automo-
biles and parts. One of General Motors' chief accessory
producers — New Departure — began its industrial career
making doorbells and bicycle bells ; then it passed to coaster-
brakes and latterly to ball bearings. Another started with
364 The Turning Wheel
bicycle gears. Hundreds of the most effective of the early
automobile salesmen came directly into the new field from
the bicycle trades; it was a commonplace to see an auto-
mobile in one show window of a store while the other
window continued to display bicycles. And, of course, the
"bicycle craze" of the early 'nineties brought the public
around to the automobile as the next step in highway travel
and rapid movement.
The bicycle craze was fast and furious while it lasted.
It began with velocipedes and high-wheel boneshakers, and
ran rapidly through to the "safety" and elaborate multiple
cycles. Chief of these was the tandem, now remembered
chiefly as "the bicycle built for two" of the famous "Daisy
Bell" song. Those were the days of famous bicycle racers,
of Tom Cooper, Eddie Bald, Harry Elkes, and Jimmie
Michaels, paced by three-, four-, five-, and six-man machines.
Probably the largest cycle ever built was a ten-seater upon
which Boston belles used to take the air to the wonder and
applause of pedestrians. To meet the demand for bicycles,
some of America's most famous precision manufacturers —
the sewing machine and firearms makers — turned part of
their plants into production of cycles and parts, and so pre-
pared themselves for similar attention to the coming auto-
mobile needs.
The swift rise and fall of the bicycle business caused
many bankruptcies which prejudiced investors and bankers
against the motor-car industry from the start. This preju-
dice remained active for years and had its influence on the
early history of General Motors. When the then young
Company needed capital in 1910 the old refrain was still
being chanted, "See what happened to the 'bicycle craze.' '
The automobile business had to live down the difficulties
of its predecessor.
Other established businesses which furnished large quotas
of dealers and salesmen for the new automobile trade were
the carriage and farm implement trades. The carriage
trades, indeed, had developed the distributorship angle of
vehicle selling before the automobile entered the American
scene in quantity; in placing Buick distribution on that
Marketing the Motor Car 365
basis, Mr. Durant followed time-tested precedents at the
outset, and of course improved on them, building by that
means a staunch and comprehensive selling organization
covering the whole country. The West, with its magnificent
distances, especially required to be handled in this way, in
great blocks rather than piecemeal, and Mr. Durant's early
success there may be counted as chiefly responsible for his
pushing Buick into first place in sales volume by 1908.
The "saturation point," one of the major delusions of the
early period, kept conveniently receding as each year
brought larger and larger sales. Prophets of doom were
always talking about the mythical point where everyone
would have all the motor cars he wanted. This opinion was
based upon carriage and bicycle precedents and its disciples
quite overlooked the fact that the automobile was an
unprecedented development. Everyone wants a new motor
car; production is limited only by buying power. Owners of
bicycles and carriages were less keen for new bicycles and
new carriages; and, in addition, persons who had never
possessed earlier modes of transport came eagerly into the
automobile market. So the "saturation point" remained in
the realm of rhetoric for many years.
AUTOMOBILE SHOWS
The big business of showing automobiles has developed
new features of late. Dealers in the larger centers present
what may be considered perpetual shows of all models in
handsome showrooms. "Automobile Row" is usually the
brightest spot in a city's mercantile section, though the
tendency of dealers to herd together is perhaps a little less
marked than it was. Nearly every sizable city now has its
annual show in the late winter or early spring, with New
York for years starting the schedule early in January. The
New York show has grown steadily in color and popu-
larity, drawing attendance from all parts of the country,
and being always well patronized by a public willing to pay
to view the new models.
In 1932, from April 2d to 9th, General Motors held
national exhibitions of its products simultaneously in the
366
The Turning Wheel
following fifty-five cities, located in thirty states and the
District of Columbia :
Albany, New York
Atlanta, Georgia
Baltimore, Maryland
Billings, Montana
Birmingham, Alabama
Boston, Massachusetts
Brooklyn, New York
Buffalo, New York
Butte, Montana
Charleston, West Virginia
Charlotte, North Carolina
Chicago, Illinois
Cincinnati, Ohio
Cleveland, Ohio
Columbus, Ohio
Dallas, Texas
Davenport, Iowa
Dayton, Ohio
Denver, Colorado
Des Moines, Iowa
Detroit, Michigan
El Paso, Texas
Grand Rapids, Michigan
Houston, Texas
Indianapolis, Indiana
Jacksonville, Florida
Kansas City, Missouri
Los Angeles, California
Louisville, Kentucky
Memphis, Tennessee
Milwaukee, Wisconsin
Minneapolis, Minnesota
Nashville, Tennessee
Night Scene: General Motors Building at the Century of Progress
Exposition, Chicago, 1933
Marketing the Motor Car 367
New Haven, Connecticut St. Louis, Missouri
New Orleans, Louisiana St. Paul, Minnesota
New York, New York San Antonio, Texas
Newark, New Jersey San Francisco, California
Oakland, California Seattle, Washington
Oklahoma City, Oklahoma Spokane, Washington
Omaha, Nebraska Springfield, Massachusetts
Philadelphia, Pennsylvania Syracuse, New York
Pittsburgh, Pennsylvania Toledo, Ohio
Portland, Oregon Tulsa, Oklahoma
Rochester, New York Washington, D. C.
There was also a special showing in connection with the
General Motors exhibit at Atlantic City. This nation-wide
selling effort received favorable publicity as the most de-
termined effort made by any corporation to revive buying.
The trade of approximately 2,000 of the largest and
strongest General Motors dealers located in metropolitan
areas was directly affected by the exhibits, and about 18,000
dealers benefited by the advertising and sales promotion
campaigns. In Boston alone 240,000 persons, by actual
count, visited the six-day Exposition with no other attrac-
tion than General Motors products.
General Motors products are displayed at all leading
automobile shows in America and elsewhere, except in those
foreign shows restricted to national products. In the case of
the Chicago and New York shows, special General Motors
exhibits are held during the period, the Hotel Astor in New
York City and the Stevens Hotel in Chicago being the
usual locations. In 1932 and 1933, the New York General
Motors special showing was moved to the Waldorf-Astoria.
PRICING AND SELLING
All the Corporation's price calculations come under re-
view in a competitive market, which is the court of last
resort, so that dealer welfare cannot be the only yardstick
in fixing prices. The industry as a whole strains for reduced
costs as the basis of appeal to the customer's desire and
pocketbook. With the increase in manufacturing efficiency,
368 The Turning Wheel
General Motors has followed the plan of building more
value into its cars year by year, adding to low-priced cars
the features introduced on higher-priced cars. But there
are evidently limits to this evolution, and the new Stand-
ard Chevrolet, with several features of the Master Chev-
rolet omitted, was a move toward a lower price level.
How much further manufacturers can go in this direc-
tion depends upon many factors, but obviously they cannot
go on indefinitely without reaching such a point that cheap-
ness fails to include the essentials of safety and de-
pendability to which the public has become accustomed. In
the meantime, the higher-priced cars tend to come down the
price scale, partly through economies in production, partly
through the introduction of smaller models bearing names
which have achieved a reputation at high levels. Altogether
the problem of price setting is one of many complications
and cross-currents upon which the Corporation concentrates
full attention, seeking to find each year a solution satisfac-
tory alike to its customers, its dealers, and its stockholders.
At best its decision must always be a compromise arrived
at after considering all these interests.
The darker the night the brighter shines the light. There
have been times in General Motors history when business
rolled in with comparatively little sales and advertising
effort, when the cry was for more cars in a seller's market,
and the public took eagerly whatever was produced. These
halcyon days had their satisfactions, of course, but they also
had their disadvantages. Temptation reigned then to let
well enough alone, to delay factory changes, and innova-
tions in design. Under the stern challenge of depression
General Motors has revised its processes in the interests of
economy and efficiency, and its major products have been
rigidly scrutinized in order to increase their appeal in a
buyer's market, which demanded not only lower prices, but
also higher quality and better workmanship.
In the United States the total number of automobile
dealers has been decreasing steadily, due partly to decline in
the number of manufacturers, and partly to the growth of
combination dealerships, in which one firm handles two or
more lines. The number of dealers declined from 50,868 in
Marketing the Motor Car 369
1926 to 38,092 at the end of 1932. Exclusive dealership
suffered heavily, while multiple-line dealerships increased
44 percent from 1926 to 1932.
One third of all dealers in 1932 handled more than one
line of cars, while seven years earlier less than one fifth did
so. In many localities General Motors contributed to this
changing status by teaming Oldsmobile and Cadillac to-
gether, and Buick and Pontiac, a selling program facili-
tated by the temporary organization of the B-O-P Sales
Company in 1932, (discontinued 1933). In 1932, Buick
dealers handling only Buick cars decreased by 26 percent,
while those handling one or more additional lines increased
by 24 percent. Pontiac and Oldsmobile moved in a similar
direction, but to a less degree. B-O-P in September, 1933,
announced 6,883 direct dealer outlets, the largest number
in five years — divided as follows — Buick, 2,105; Olds-
mobile, 2,448; Pontiac, 2,330.
Of the 53,437 passenger car representations reported
by Automotive Industries as in business at the close of 1932,
General Motors passenger car divisions were credited with
16,000, or a little less than 30 percent of the total for the
entire industry.
In the beginning automobile makers were financially
assisted by their suppliers and their distributors. The for-
mer sold their goods on liberal datings, the latter made
large deposits in advance. With these aids the manufacturer
managed to produce a large volume on small working
capital. Both the dealers and supply men were naturally
consulted in planning a new model. Gradually, as engi-
neering advanced and manufacturing companies came into
large capital and controlled more of their supplies, the auto-
mobile makers advanced toward uniform control of dis-
tribution. Their contracts usually contained a thirty-day can-
cellation clause: in a "seller's market," with dealerships in
demand, this clause was the "ace in the hole" through pos-
session of which manufacturers could impress their will on
dealers in the direction of adequate servicing, display, local
advertising, and many other merchandising activities. Re-
pair charges were fixed by the factory, and at one time
dealer accounting was under direction.
370
The Turning Wheel
In no retail trade is the dealer so closely controlled.
Mr. W. C. Durant advertised one of the early Chevrolets
to dealers in these words: UA little child can sell it." By
systematizing retail efforts, and taking their message
directly to the public through advertising, the manufac-
turers are sometimes accused of reducing automobile sales-
men to the status of "order takers." This trend, especially
Chevrolet Assembly Line at Century of Progress Exposition,
Chicago, 1933
strong in the sales programs of great quantity producers of
the industry, reached its height in 1929. With the develop-
ment of a "buyer's market" after 1930, selling became more
difficult, and good salesmen were more appreciated. Conse-
quently, the stronger dealers little by little have insisted on
more leeway. Even though control aimed at, and usually
resulted in, better merchandising and higher dealer profits,
human nature — even dealer human nature — sometimes
resents being "scheduled and programmed" too openly and
too often. A good deal depends on the tactfulness with
Marketing the Motor Car 371
which the program is preserved. The new note in automo-
bile salesmanship, and one which marks the eclipse of the
high-pressure, mass-campaign methods, is emphasis on
manufacturer-customer relations based upon consumer re-
search, and a close study of markets.
Chevrolet since the end of 1928 has supplied more retail
outlets than any other automobile manufacturer. Chevrolet
has no distributors, as is the case with nearly all manufac-
turers, but deals directly with all its outlets, a situation
making for coordinated action in the direction of a central
program. Chevrolet's success in this regard is one of the
reasons for its great strides, but changing conditions of the
past three years have brought revisions even in Chevrolet's
selling plans. With the discontinuance of B-O-P Sales Com-
pany, the direction of selling activities was returned to the
divisions.
USED CAR DISPOSAL FUND
No consideration of automobile marketing would be com-
plete without reference to used cars. The year 1911 may be
considered as marking the period in which used cars began
to receive special consideration. In that year the Glidden-
Buick Corporation was organized in New York City to
sell used cars taken in exchange by the metropolitan branch,
the conclusion being reached that in that area, at least, it
was well to keep the merchandising of new and used cars
in separate hands. Other areas operated on other plans.
In 1914, or thereabouts, used cars began to accumulate
to the point of clogging trade. In that year the Curtis Pub-
lishing Company, after a searching investigation reported:
Of all the problems that vex the automobile industry, probably the
most serious and difficult of solution is that of the used cars. The
second-hand car problem is likely to become more acute as the
number of cars increases.
With the revival of prosperity the glut decreased some-
what, and little more was heard of it until the end of the
war. Then with increased production of new cars and the
strides taken in production methods, the used car problem
began to assume serious proportions.
372 The Turning Wheel
The truth of certain shrewd observations which the
Curtis company had made in its 1914 report began to be
revealed. Many dealers proved to be better salesmen than
they were buyers. The truth is that their buying experience
had been somewhat limited, due to the fact that they took
their cars at regular discounts from list prices fixed by the
manufacturer. Also, hosts of dealers were weak in account-
ing, in common with most local merchants. Many of them
thought that when they sold a used car for $100 less than
they had allowed on a new one, they were making money,
the commission on the new car being large enough to take
up the slack. They overlooked the fact that in all prob-
ability they would have to furnish some service without
charge, and the overhead cost was often completely dis-
regarded. Dealers began to lose money without knowing
quite why, until gradually their capital was either dissipated
or frozen in the form of slow-moving merchandise on a
used car lot. Two sales had to be made to produce one
normal profit or, to be accurate, less than one normal profit,
for interest and depreciation on cars carried over the
winter cost the dealer heavily, and each spring he was likely
to find himself with a carry-over of cars which had to be
re-priced downward because they were a year older.
Destructive competition set in under the name of allow-
ances, one dealer bidding more than the other. Instead of
cutting the established prices on new cars, dealers effected
the same result by allowing extravagant values on old cars,
throwing in tires and other equipment, and guaranteeing
extended free service. The used car surplus became the
cause of price-cutting, direct or indirect.
Counsels of perfection, excellent advice to dealers, could
make small headway against this condition. Various rem-
edies were applied by the more progressive dealers; concen-
trating on the problem, they began to set up used car
lots, which had the advantage of goodly space at small
rentals. They organized and trained special staffs of sales-
men and attendants to dispose of used cars. Manufacturers
adopted various courses in assistance. They increased their
advertising appropriations in an effort to bring the buyer
to the dealer so convinced of a certain car's merit that he
• Marketing the Motor Car 373
could not be moved away by competitors offering a little
more for his old car. A determined effort developed to
circulate among all dealers a fair price list on used cars,
arrived at by expert calculation of depreciation — a
practice previously found effective by progressive distribu-
tors. General Motors entered upon a study of dealership
costs, worked out comprehensive accounting systems for its
dealers and installed them at reasonable expense through
the General Motors Management Service, Inc. This activity
has recently been discontinued, the reason for its existence
having passed largely through the survival, under economic
pressure, of those dealerships with sound accounting sys-
tems, competent staffs, and full reports from every part of
their territories.
Notwithstanding all these efforts, used cars accumulated
to the point at which manufacturers began considering the
advisability of assisting dealers to clear the streets and lots
of the more enduring and least valuable specimens.
Chevrolet was the first to act, setting up a Used Car
Disposal Fund, financed by a specific levy against each new
car manufactured. From this fund local dealers received
credits of $25 each on certification that cars had been de-
stroyed. Under this plan approximately 650,000 cars were
junked from 1927 to 1930 inclusive. Later the National
Automobile Chamber of Commerce issued a re'port advising
action along this line, and several other companies estab-
lished financial incentives for junking. Chevrolet's disburse-
ments form a total sum not reached by any other manufac-
turer. The idea of the Used Car Disposal Fund originated
with a Wyoming dealer who advanced it in a trade magazine.
Four out of every five sales of new cars now involve a
trade-in. With used cars the percentage is lower, 40 to 50
percent. The percentage of trade-in deals has been rising in
the case of both new cars and used cars for several years,
but 1931 saw a slight drop in trade-ins of used cars. One
of the chronic evils of the used car business is that to dis-
pose of a used car taken in trade for a new car, the dealer
in almost half his re-sales must take in another and less
valuable used car as part payment for number one. Several
374 The Turning Wheel
deals may be necessary, each involving less reliable mer-
chandise before the dealer can clear the transaction.
The partial paralysis of the market for cars in the past
two years brought almost complete stability at a low level
of production, as may be seen by comparing the number of
cars scrapped and replaced with sales in the domestic
market in 1931 and 1932. In 1913 three out of four sales
represented additions to the whole number of motor cars in
use, while the fourth took the place of the car previously in
service. By 1924 this ratio had dropped from three-to-one,
to two-to-one; by 1926 nearly half the cars produced went
into replacements, and in 1927 replacements accounted for
about three quarters of total production.
General Motors escaped almost entirely the pressure
which this situation exerted on the industry in general in
1927. There were two reasons. One was the partial sus-
pension of Ford activities coupled with the rapid rise of
Chevrolet; the other was the favorable reception of
the new Pontiac, 60,000 more Pontiacs having been sold in
1927 than in 1926. These two factors resulted in General
Motors percentage of the industry's total business rising to
42.5 in 1927. Only once has this figure been exceeded for a
full year's business: in 1931 the ratio was 43.3 percent.
In 1930 the American automobile industry approached
a dead center, and in 1931 it passed that center, 755,000
fewer cars being produced than the number scrapped, re-
placed, or kept in storage by owners. In 1932 this situation
was even worse due to the low new-car volume of that year.
With practically no new buyers available, the strain on
dealers naturally became acute, but for General Motors
dealers it was somewhat relieved by the operations of the
Used Car Disposal Fund, the combining of sales representa-
tions in many localities, and the Corporation's policy to
prevent overloading dealers with cars for stock.
DEALERS' STOCKS
Elsewhere has been related the growth of control over
General Motors schedules in line with regular reports of
dealers' stocks. Cars on hand, both with the divisions and
Marketing the Motor Car 375
dealers, were at peak in 1924. One must go back eleven
years to 1922, to find as low a stock of cars as that of
1933. This reduction measures both the effectiveness of the
Corporation's control program and the desire of the Cor-
poration to avoid pushing its dealers into difficulties by sell-
ing them too many cars.
Along with a detailed program of sales promotion went a
continuing effort to improve the financial status of dealers
wherever weaknesses appeared, the inquiry being pursued
tactfully, and remedies being proposed in a spirit of coop-
eration. Of course, where dealers who consistently fell
below "bogey" — the national average for dealers in the
appropriate price class — failed to avail themselves of the
advice and assistance offered, changes in representation
were made.
Another reform instituted was distinctly in the dealer's
interest. It had been the habit, in the early days of the
industry, for dealers to contract with the factory for a
year's requirements, taking cars whenever the factory
shipped them, a fact which contributed to the dealers' over-
stock of 1924. The new plan, which has been used since,
called for firm orders from dealers for one month in
advance and tentative orders for three months in advance,
efforts being continued to turn the tentative orders pro-
gressively into firm orders. This has had the effect of reliev-
ing dealers of uncertainty, and in practice goes far to offset
the statements often heard to the effect that factory domi-
nation has decreased dealer initiative. In this vital matter of
control of shipments, dealers are freer and safer than they
were ten years ago.
Until fairly recently nearly all manufacturers, with an
eye to production totals, were disposed to crowd cars upon
dealers in quantities likely to prove embarrassing in a fall-
ing market. In the early days of the industry this was
necessary, because manufacturing and storage facilities and
financial capacities were insufficient to meet the seasonal
demands of spring and early summer. A beneficial change in
this regard came with the rise of closed cars to favor. At
present the market takes approximately 44 percent of its
376 The Turning Wheel
automobiles in March, April, May, and June, and the first
six months of the year develop 60 percent of the annual
sales. The business is still seasonal, but slightly less so than
it used to be. However, with mass production methods to
the fore, the temptation arose to force cars on dealers faster
than they could sell them, using a "floor plan" loan to
finance all or part of the transaction. A turn of the
economic pendulum soon revealed the danger. Overloaded
with new cars which must be sold soon after receipt, a
dealer becomes vulnerable to the point where he must accept
at uneconomic valuations more used cars than he can dis-
pose of quickly and profitably. After one experience of this
nature General Motors has set its face against overloading
dealers, in the confident belief that the Corporation should
not seek to improve its position at the expense of, or to the
embarrassment of, its dealers, upon whose continued sol-
vency and aggressiveness so much depends.
GENERAL MOTORS HOLDING CORPORATION
Another effort of the Corporation to assist dealers goes
forward under the General Motors Holding Corporation,
formed on June 22, 1929, to invest in dealerships where
more capital seemed to be required. The Holding Corpora-
tion maintains six regional offices: in New York City,
Chicago, San Francisco, Dallas, Atlanta, and Detroit. After
four years of operations it has invested Corporation funds
in dealership companies, in circumstances and under con-
ditions which seem at once to safeguard the investment and
promote effective representation.
Applications for the Holding Corporation's cooperation
come through the sales offices of the car divisions which base
their recommendations upon a careful investigation of the
dealer's situation, character, and prospects. A check-up by
the Holding Corporation is then made. Usually the Holding
Corporation's capital is used either to retire silent partner
interests and/or bank loans, or to increase facilities where
they seem inadequate to the potential market. Holding
Corporation investments are not regarded as permanent,
the expectation being that the dealer's share of the profits
Marketing the Motor Car 377
will retire the Holding Corporation's investment. The
Holding Corporation is regarded as operating a revolving
fund to be used capital-wise to improve sales representation
which, except for under-capitalization, is healthy and well-
managed. While General Motors' interest remains in the
investment, the Holding Corporation exercises a consider-
able measure of control, and endeavors to reduce expenses
and increase profits.
GENERAL MOTORS FLEET SALES CORPORATION
The special problem of fleet sales to large users resulted
in the incorporation of General Motors Fleet Sales Cor-
poration in 1930. Deliveries were handled through dealers,
under a special contract, but Fleet Sales Corporation dealt
directly with national and state governments. The fleet
users' agreement applied only to operators of at least 100
cars who agreed to buy a minimum of $20,000 worth of
General Motors cars and trucks annually.
In 1933 the minimum Fleet sales contract was reduced
to $15,000; also dealers began to deal directly with national
and state governments.
With the formation of this corporation, the entire fleet
activities of individual General Motors divisions were taken
over by the General Motors Fleet Sales Corporation. This
consolidated plan of selling resulted in better sales coverage
of large national fleet users at a lower sales cost, due to a
reduced total personnel. In addition, it made it possible
for one General Motors organization, specializing in a
particular field, to sell the entire line of cars and trucks to
the large fleet user, and thus better fit General Motors
products to each of the transportation needs of the user.
This corporation also handles the sale of General Motors
cars and trucks to the United States government, the vari-
ous states, and the District of Columbia. During 1932,
2,101 General Motors cars and trucks were sold to the
national government, for $1,404,330. In the first seven
months of 1933, government awards to General Motors
totaled $5,730,634, representing 11,917 cars and trucks.
This large increase is principally due to the Reforestation
378
The Turning Wheel
program, and the motorizing of certain sections of the Na-
tional Guard. Awarding of government orders proceeds
under strict competition both as to price and quality, yet
General Motors secured 78 percent of this business on the
basis of units, and 75 percent on the basis of dollar volume.
The outstanding item in 1933 government awards was
Chevrolet.
Dr. Carlos C. Booth, first American physician to use an automobile
in his practice. Car designed and assembled by himself, 1896
Even in the automotive industry itself, relatively few
persons comprehend how the fleet business has expanded.
Within five years General Motors divisions have sold
64,339 units to 232 companies. Each of 84 companies has
purchased an average of 567 Chevrolets during this period,
the heaviest buyer taking 3,665 units. In the same period,
3,905 General Motors trucks have gone to 41 fleet users,
the average buyer taking 95. Truck business, including both
Marketing the Motor Car 379
Chevrolet and General Motors trucks, runs at about 25
percent of total fleet sales, passenger cars for business pur-
poses, 75 percent.
Through its studies of mass transportation problems and
the special needs of large users, General Motors Fleet
Sales Corporation has brought elements of strength into
dealer relations with the larger purchasers of automobiles.
It has been said that the first automobile was bought,
not sold. That was probably true, also, of the io,oooth
automobile; a demonstration sufficing to convince the cus-
tomer, but the car had to be sold to the dealer. Today,
with dealer organizations spanning the world, automobiles
have so increased in quality and numbers that there must be
a closer relation between output and potential sales, between
manufacturer and consumer, between dealer welfare and
producer's prosperity. In the enlightened merchandising of
the future, the indirect approach based upon consumer
research and close knowledge of market needs is likely to
replace the former emphasis on high-pressure salesmanship.
Some of the glamor of the pioneer days has vanished as
the automobile trade has become established as a huge and
stable business, operated on scientific lines with all the safe-
guards which can reasonably be set up for the protec-
tion of its representatives in a freely competitive market.
But the marketing of automobiles still attracts large num-
bers of keen, driving men, full of confidence that the auto-
mobile will reward their efforts amply as the years roll on.
Chapter XXVII
FINANCING AND INSURING THE BUYER
A
UTOMOBILES, as we have seen, went from factory to
dealer on a cash basis in the early days of the industry, and
were generally sold by the dealers for cash. Dealers soon
discovered, however, that some excellent sales required
credit, and they began to accommodate purchasers with
good credit or satisfactory records under special circum-
stances. As they found more sales could be made where
credit was available, the more daring of them began to
work out plans for instalment selling, getting a substantial
down payment, and holding title to the car until it had
been completely paid for. It is said that the first systematic
use of instalment selling in the automobile field occurred
in San Francisco in 1913, but this priority is disputed by
those aware of similar early arrangements elsewhere. A
trade growing vigorously, with so many keen, driving men
at work over so wide an area, was certain sooner or later
to find ways of using credit in large sums.
The basis of these instalment transactions was, of course,
the dealer's knowledge and vital interest in the collectibility
of his account; this element is continued under the recourse
or full endorsement plan wherein the dealer's responsibility
remains behind the obligation until it is paid in full.
There grew up, naturally, finance companies willing to
purchase automobile paper from dealers at a discount
on well-sold and well-insured cars. Bankers might not feel
able to take automobile paper in quantity, but they were
quite willing to lend money to sound finance companies so
that the latter could do a large volume of business on
380
Financing and Insuring the Buyer 381
comparatively small capital. In general, these specialized
finance companies prospered, because their differentials or
charges (the difference between the cash and the time or
instalment purchase price) were relatively high, and the
risks comparatively low. As experience accumulated, it ap-
peared that a good, insured automobile in the possession
of an honest man or woman, and under the complete legal
protection with which all states surround property held
under lien, was a fairly safe investment, provided that
down payment and schedule of payments anticipated the
depreciation of the security in use.
The finance companies developed another line of automo-
bile investment — that of financing dealers' stocks. The day
had passed in which one sample car represented the only
large investment the dealer had to carry. As the factories
enlarged their lines, the dealer could provide adequate rep-
resentation only by showing each model in its various body
styles. His own capital and earnings were usually absorbed
in his growing business, providing more floor space for
showing and stocking cars, a larger supply of parts, better
service facilities, and of course used cars taken in trade.
Arrangements were made for stocking new cars under a
variety of agreements which were generally known as
"floor plans." When these cars were sold for cash, the
liens on them were quickly released. At first it was neces-
sary for the dealer to pay and secure title to the car before
he sold it at retail on instalments, but as the business de-
veloped many transactions consisted of merely accepting
the retail contract in part or full payment of the wholesale
obligations. The dealer, of course, remained liable for all
unpaid balances, so that the finance company always had as
security back of the transaction the merchandise itself ade-
quately insured, the credit of the purchaser, and the general
credit of the dealer.
The keen financial mind of John J. Raskob began to work
on this financing problem shortly after he entered General
Motors. Need for a finance service for the dealer as well as
the retail purchaser at moderate time-price differentials, and
functioning uniformly as to policies and rules, was most
apparent and was urged upon the Corporation from many
382 The Turning Wheel
quarters. If General Motors could set up the machinery to
provide such service at reasonable profit, the result would
be increased sales, improved dealer earnings, and greater
consumer satisfaction. Accordingly, on January 29, 1919,
after a thorough study of the situation, and weighing both
the advantages and hazards of the innovation, General
Motors Acceptance Corporation was incorporated under
the investment section of the banking law of the State of
New York, with 20,000 shares of Common stock, $100 par.
General Motors Corporation bought this stock at $125 per
share, enabling the new subsidiary to start life with a capi-
tal of $2,000,000, and a surplus of $500,000. The Corpora-
tion's subsequent purchases of GMAC stock have been at
that average price, and the sums involved were distributed
between capital and surplus in that proportion.
GMAC'S purpose has been condensed to this statement:
Briefly the aims and purposes of the Corporation are to assist,
through the proper application of the credit function, in the orderly
distribution and sale of the products of the General Motors Cor-
poration in such a manner as will make for a sound and healthy
manufacturing and merchandising condition.
It being foreseen that credit would inevitably play a most im-
portant part in the development of the automobile market, it was
the aim of General Motors Corporation to keep within its con-
trol, to the greatest extent possible, every factor of importance in
its development. At the same time it was understood that the Cor-
poration (GMAC) was to function quite independently and be
free from any pressure of expediency which might impair its char-
acter and purpose, and so defeat the very aims which brought it
into existence.
In order to fulfill these functions the organizers of GMAC
developed complete plans for financing sales of General
Motors cars and products. It set up also a Financial Sales
Department, through which the obligations of the Accep-
tance Corporation were offered independently to banks
and investors throughout the country, thus creating a stable
source of accommodation through the use of which ad-
ditional business would be possible beyond the extent of
GMAC'S own capital. In this department uare centered all
Financing and Insuring the Buyer 383
operations through which the Corporation (GMAC) finances
itself, including not only its sales activities, which parallel
somewhat the lines of operation employed by commercial
paper brokers, but all its bank relations and day-to-day bor-
rowing."
Under the GMAC wholesale plan, General Motors dis-
tributors and dealers, after credit has been established, may
purchase new passenger cars, commercial vehicles, and
other products of the Corporation directly from the sales
Companies of General Motors by paying a small amount
in cash; the balance as the cars or products are released
from trust, or at an agreed date after shipment. Merchan-
dise so financed may be stored in the dealer's showroom
for display, in warehouses under the control of the dealer,
or in public licensed warehouses under pledge of warehouse
receipt.
General Motors Acceptance Corporation retains title to
the products financed until full payment is made. The plan
provides that a dealer may pay the amount due on a car,
and secure immediate release. After release the dealer has
full title to the car.
The GMAC wholesale charge includes insurance protec-
tion for the dealer for the full laid-down price of the car
against loss or damage arising through fire or total theft.
Under the GMAC retail plan, General Motors dealers
are urged to sell the products of the Corporation to cus-
tomers in good credit standing upon terms properly suited
to the purchaser's income. The buyer pays a portion in cash,
and/or trade-in (usually from 30 to 50 percent, depending
upon his circumstances) and gives an obligation for the
remainder payable in equal instalments adjusted to his in-
come. If the transaction is in accordance with sound credit
merchandising policy, and the resultant obligation is suit-
able, GMAC purchases the time sales contract from the
dealer, and carries it to maturity.
General Motors Acceptance Corporation has recourse
to the dealer on all obligations of purchasers which are
bought by the Corporation. The deferred payments are
made by the purchaser direct to the Acceptance Corpora-
tion, relieving the dealer of routine collection details.
384 The Turning Wheel
Adequate reserves are set up to protect the dealer as well
as GMAC against loss.
The GMAC retail plan provides fire and theft insurance
supplied by the General Exchange Insurance Corporation,
protecting the purchaser and dealer as their interests may
appear. A policy is issued to each purchaser so that he may
be properly informed of the exact nature of his protection.
The purchaser may secure, at his option, collision, or all
property damage insurance.
The total retail GMAC financing differential varies
according to territory for the reason that insurance protec-
tion is included as part of the differential, and insurance
premiums vary according to territory and type of car. Low
differentials are made possible by large volume and efficient
and economical operation.
In contrast with other forms of instalment sales, the
amount of the differential in the time price paid by the pur-
chaser depends upon the term and amount of his obliga-
tion. He pays only in proportion to the accommodation he
receives. The larger the down-payment, and the fewer the
number of monthly payments, the less the differential be-
tween the cash and time prices.
GMAC recognizes no fixed terms — GMAC believes that
the sale of cars on deferred payments as well as for cash
should be based primarily upon the quality of the car at
the price, and not on the lure of so-called "easy terms, "
terms being regulated to the income and circumstances of
the purchaser, and its financing operations are carried on in
accordance with this principle.
In The Economics of Instalment Selling? Professor
E. R. A. Seligman describes the recourse, the non-recourse
and the repurchase system of adjusting the difficulties
arising from delinquencies:
The recourse system is so called because the customer's notes, which
are handed over to the finance company by the dealer, are endorsed
by the dealer so that the finance company, in case of the purchaser's
failure to pay, will have recourse against the dealer. The dealer,
Carper & Brothers, New York City, 1927.
Financing and Insuring the Buyer 385
therefore, in order to discharge his liability to the finance com-
pany, is compelled to take steps looking to the repossession of the
car (unless, indeed, as is sometimes done, the finance company re-
lieves him of this responsibility and repossesses the car for him)
which he may then sell as a used car to meet his liability to the
finance company. The dealer thus assumes the responsibility in-
volved. If he sells the used car for more than the balance of un-
paid instalments, he makes a profit; if he sells it for less than this
balance, he undergoes a loss. The important factor, therefore, is
the difference between the actual value and the amount of unpaid
instalments.
Opposed to the recourse system is the non-recourse system, or
in other words, the system whereby the finance company has no
recourse against the dealer. The finance company here assumes all
of the responsibility. It not only makes the original advance to the
dealer and receives the instalments as they become due but, in
case of default, institutes its own methods for securing repossession
of the car; and subsequently, after salvaging and reconditioning
the car, the finance company itself disposes of the used car in the
market. Under this system the dealer becomes to all intents and
purposes the agent of the finance company for selling a new car.
The decision, and frequently the investigation, as to whether the
individual purchaser is a good risk is relegated to the finance com-
pany; and virtually all that remains for the dealer to do is to dis-
play the car, and to arrange with the purchaser as to terms, which
in most cases are the standard terms fixed by the finance company.
The third or intermediate plan is the repurchase method. Under
this plan the finance company has no recourse as such against the
dealer, but enters into a contract with him whereby he agrees, in
the case of repossession by the finance company, to repurchase the
car. In this way the finance company is saved the necessity of at-
tempting to dispose of the used car, and limits itself, in a large
measure at least, to its purely financial function.
In principle, GMAC has held firmly to the recourse
system, continuing the dealer's responsibility in the trans-
action until it is finally closed. This is considered highly im-
portant, since it means that control of credit sales is thus
primarily in the hands of the dealer, his judgment being
supplemented by the broad experience of a highly trained
credit organization. It follows that losses therefore will be
kept to a minimum, because the dealer will exercise care in
386 The Turning Wheel
selecting his instalment customers. This fundamental differ-
ence between recourse and non-recourse companies accounts
for the higher differentials generally charged by the latter,
since they are not in a position, as the recourse companies
are, to reduce risk by keeping the dealer back of the paper
originated by his sale.
Under a strict recourse plan, no losses could theoretically
be sustained by the finance company except through dealer
insolvency. From inception until August i, 1925, under the
GMAC plan the dealer had to meet all losses up to the limit
of his ability on certain risks against which he could not
well protect himself cheaply and efficiently. These risks of
conversion, confiscation, and collision being insurable, GMAC
covered the risks by insurance and relieved the dealer.
From 1919 to 1932 inclusive, GMAC purchased in the
United States and Canada instalment contracts on 3*775,-
777 new General Motors cars, or 32.6 percent of all Gen-
eral Motors dealers' sales to users, and 3,564,468 used
cars. Under the wholesale plan it "floor planned" for
dealers 3,777,703 new cars or 32.7 percent of General
Motors sales to dealers.
The record reveals a sudden rise in GMAC contract pur-
chases from 1925 to 1926. Before 1925, approximately 20
percent of new General Motors cars were sold in the United
States and Canada on the retail GMAC plan. Since 1925 the
average has been about 40 percent. General Motors pro-
duction turned sharply upward in 1926. Furthermore,
GMAC'S service had been augmented in 1925 by the crea-
tion of an insurance company; and by the inclusion in its
financing plan of protection for the dealer against the
hazards of conversion, confiscation, and collision. As time
sales became more popular the percentage of a dealer's
business represented by instalment sales increased and, like-
wise, the repossession risks in relation to his resources.
Therefore GMAC instituted a reserve for the dealer to
protect him against the costs and losses involved in han-
dling repossessions; this dealer-reserve probably was a big
factor in the increase in GMAC'S volume after 1925.
Since, in addition to the moral factor involved, the
security and liquidity of any instalment contract is definitely
Financing and Insuring the Buyer 387
influenced by the size of the down payment and the schedule
of instalments, the effort has been to avoid long commit-
ments and small down payments. The most inclusive cate-
gory is that which has one third to one half of cash value
paid down with the balance spread over twelve months.
It must not be inferred that the comparatively small
losses result altogether from the relatively safe character
of the business; on the contrary, they are kept in control
by good management exercised at many points in the
transaction. By no means is every car paid for on schedule,
and when payments fall behind it is a nice problem whether
to extend or renew the paper or to repossess the product. In
all such cases the GMAC policy is to permit the product to
remain with the purchaser whenever it is reasonably safe to
do so, and whenever it appears that with considerate and
helpful service the purchaser can and will pay. The result is
that retail renewals, in consideration of unusual circum-
stances, became necessary at times. The Corporation's
policy in this regard is regulated by conditions, with due
thought given to both the interests of the dealer and the
purchaser.
To finance the growing volume of business, GMAC sold
$50,000,000 of 5 percent serial gold notes, dated March i,
1926, and maturing at the rate of $5,000,000 annually,
through a banking syndicate composed of J. P. Morgan
& Company, the First National Bank, the Bankers Trust
Company, and The National City Company, all of New
York. Before this sale GMAC had been depositing its
domestic receivables under a trust deed, against which
security collateral gold notes were issued. From 1919 to
August, 1925, the trustee holding the documents as security
for GMAC collateral gold notes was the Irving Bank-
Columbia Trust Company. A personal trusteeship was
arranged in 1925 as a matter of economy. The $50,000,000
long-term loan of March, 1926, was not secured by col-
lateral in trust, but an indenture in behalf of the holders of
the notes was executed to the Bankers Trust Company.
Since April i, 1926, GMAC has not pledged its domestic
and Canadian collateral.
388 The Turning Wheel
The previous trustee then became comptroller; receiv-
ables were segregated under his control. The comptroller
certifies to the possession of live receivables and/or cash
equal to GMAC'S obligations.
Short-term borrowings were further funded on February
I, 1927 when through the same banking syndicate $50,-
000,000 of ten-year sinking fund 6 percent gold debentures
were sold to the public.
The Financial Sales Department, handling domestic bor-
rowing operations, has established a national market for
its short-term paper through banking institutions in every
state in the Union. More than 10,000 banks have purchased
these notes, this clientele standing at 7,200 on December
31, 1932. Other customers are insurance companies, cor-
porations, and individual investors. Notes are offered in
denominations of $500 to $1,000,000 at prevailing discount
rates for commercial paper and are payable in many of the
principal cities of the country.
Canadian business is financed, primarily, by bank credit
obtained in Canada. Financing of overseas branches is
handled through the Overseas Bank Relations Department,
the funds coming from both domestic and overseas banking
institutions.
In addition to automobile paper, which forms the bulk of
its business, GMAC has retail sales plans for the purchase
of paper arising out of sales of other General Motors
products, including :
Delco farm-lighting and power plants, oil burners,
radios, Delcogas machines — all manufactured by Delco
Appliance Corporation of Rochester, New York; Frigi-
daire household electric refrigerators, electrical refrigera-
tion for commercial establishments, water coolers, ice
cream cabinets, bottle coolers, and air conditioning equip-
ment manufactured by the Frigidaire Corporation, Day-
ton, Ohio.
INSURANCE
The financing of motor-car purchases has always in-
volved the question of adequate insurance protection.
Financing and Insuring the Buyer 389
Serious damage to the automobile, from any cause whatso-
ever, affects in many cases the willingness and even the
ability of the buyer to pay out what is still due on the con-
tract. Prior to August, 1925, GMAC did not require insur-
ance, but left the matter of proper insurance entirely up to
the buyer and the dealer. General Motors, through General
Exchange Corporation, maintained a service which assisted
and advised dealers in their insurance problems, counseled
with the manufacturing divisions on matters of construc-
tion, and assisted buyers and dealers to secure adequate
insurance protection through reliable sources. It reached a
volume of $1,200,000 in annual premiums in 1924, writing
policies on 250,000 cars. Its experience resulted in the
extension of such coverages as confiscation, conversion, and
single-interest collision, and other forms of protection to
meet the needs of the dealer in connection with his time
sales. Analysis of many claims resulted in recommending
changes in construction and led to the improvement of anti-
theft locks, better wiring, and other improvements built into
each General Motors car.
Until succeeded by General Exchange Insurance Cor-
poration, GEC built up a body of experienced insurance per-
sonnel and statistical knowledge which was of great value
to its successor. Its general manager was W. A. Edgar
from 1920 to 1922, when he was succeeded by Livingston L.
Short, who later became president of the General Exchange
Insurance Corporation. Curtis C. Cooper was president of
GEC and chairman of GEIC'S board during his service as
president of GMAC.
Accumulating experience left no doubt that insurance
was urgently needed to protect the various interests of the
buyer, the dealer, and the purchaser of the contract in all
instalment sales of automobiles. Only 57 percent of buyers
were voluntarily insuring their cars for their own protec-
tion. Thousands of instalment buyers suffered heavy losses
without recovery, and of these many were financially unable
to replace or repair their cars. As a result General Motors
and its dealers lost many customers, and both the dealer
and GMAC were in a position to lose directly, since sums
390 The Turning Wheel
payable on seriously damaged, stolen, or destroyed cars
were frequently left unpaid.
Once the situation had been thoroughly canvassed, it
appeared evident that the buyers of General Motors
products, the dealers and General Motors itself had so
much at stake in the provision of adequate automobile insur-
ance that it became necessary to go beyond the service
offered by General Exchange Corporation. Accordingly,
the formation of General Exchange Insurance Corporation
was authorized on June n, 1925, with a capital of
$500,000, and surplus of $1,000,000. GEIC began to func-
tion in August, 1925, being chartered under the insurance
laws of the State of New York. Within a few months it was
admitted to do business in all the states, the territories of
Alaska and Hawaii and the Dominion of Canada, offering
insurance coverage in each policy protecting the interests of
the buyer, the dealer, and GMAC. The success of this enter-
prise was immediate. On June 30, 1927, after little more
than two years of operation, the net worth of the company
had grown to $2,176,000 from the original investment of
$1,500,000. The capital of GEIC has since been increased to
$1,000,000, and the surplus to $1,500,000.
The insurance company has gone on expanding. In prac-
tically every year since it began operations it has written
more automobile insurance than any other company. In 1929
there were 495 stock insurance companies in business writ-
ing all lines of fire insurance. During 1928 the General
Exchange Insurance Corporation stood tenth as to divi-
dends paid, twenty-second as to volume of premiums writ-
ten, thirty-ninth as to assets, and forty-ninth as to capital
funds, although many of the other companies insure classes
of merchandise which are not included in GEIC coverages.
Furthermore, GEIC solicits neither renewals on fully paid
for cars nor policies on cars sold for cash, although a small
volume of this class of business is written which comes to it
unsolicited.
Field experience showed the necessity for prompt settle-
ments. Coverage had to be dependable and loss-settlements
very prompt, in order that the buyer of the car could have
his car repaired as soon as possible after a loss occurred.
Financing and Insuring the Buyer 391
Ill-will quickly develops in the case of delayed settlements,
the owner's impatience turning into criticism of the car
itself, the dealer, and the Corporation which stands behind
both. Slow settlement of claims is a blow to the prestige of
an insurance company, for delay in securing service or
needed parts keeps the buyer out of his car, on which his
pleasure, and frequently his business, depend. Obviously,
these considerations require special treatment, and are
largely responsible for the policy which GEIC follows in
settling claims; namely, to give the insured exactly that to
which he is entitled under his insurance policy, and to make
it available as quickly as possible.
The speed of settlement is quite remarkable. More than
7,000 claims are settled in an average month by GEIC'S
own personnel in the field. Although settlements are made
in distant areas and with motorists away from their place
of residence, only 15 percent of claims against GEIC
(other than total thefts) remain unsettled more than thirty
days after date of loss. This includes suspicious and con-
troversial claims. Total thefts, however, are subject to
the usual sixty-day waiting period, a procedure followed by
all insurance companies in order to let the police act toward
recovery of the stolen car. Unless the car is recovered with-
in sixty days, the claim is paid on a total loss basis, the pur-
chaser receiving a sum equal to the value of his car at the
time of loss. GEIC acts so promptly in these cases that
within five days after the waiting period 95 percent of the
owners receive checks covering their losses.
In settling 85,000 insurance claims a year for a gross sum
of $5,000,000 GEIC comes in contact with many pur-
chasers under conditions making directly for building of
good-will. The staff adjuster, who is a GEIC employee,
visits the assured in his home or office promptly, and
arranges a fair settlement without delay. Where repairs are
necessary, the work is done wherever possible by the dealer
who sold the car, assuring the purchaser in this way the use
of genuine parts, and authorized General Motors service.
Upon completion of the work, payment for the repairs is
usually made by GEIC directly to the dealer. A satisfactory
claim settlement and satisfactory repairs assist the dealer
392 The Turning Wheel
in cementing his relationship, and that of General Motors,
to the buyer.
Among the coverages which were added to the GEIC'S
service in 1930 with the approval of both dealers and buyers
is the Accidental Physical Damage (A.P.D.) policy covering
damage to automobiles from all the usual causes, and some
most unusual ones, including floods, tornadoes, riot, civil
disturbances., and airplanes. In the A.P.D. policy collision
insurance is included. The advantage to the buyer of
this type of policy is apparent, since it results in the almost
automatic recovery of his means of transportation with the
least possible delay. The advantage to the dealer is also
evident, since this insurance provides cash for the payment
of repairs. The Accidental Physical Damage policy is regu-
larly offered by GMAC as an integral part of its plan.
Buyers may waive the collision feature if they so desire, but
more and more are availing themselves of it.
When General Motors entered the insurance business,
the wisdom of the move was questioned by many insurance
men, even though the Corporation made clear its intention
to operate only in one highly specialized field. It was said
that GEIC'S business would be at the expense of other com-
panies. This has not been the case. Through the united
efforts of GMAC, GEC, and GEIC, the education of the
motoring public to the benefits of automobile insurance has
been pushed decisively, with the result that the business of
other companies has increased along with that of GEIC.
Other companies have benefited by writing policies on re-
newals after GMAC has been paid out, and on cars sold
for cash to persons initiated into the merits of automobile
insurance by GMAC requirements on a former purchase.
The growth of the General Motors Acceptance Corpora-
tion since 1919 follows the upward curve of the industry
and the Corporation's business in an accelerated tempo as
the popularity of instalment buying has increased. Due to
purchases of its stock by the General Motors Corporation
year by year until 1929, plus a transfer of $13,750,000
from undivided profits to capital and surplus, GMAC capital
Financing and Insuring the Buyer 393
and surplus rose from the original figure of $2,500,000 in
1919 to $70,000,000 in 1929. In the same period time sales
transactions, both wholesale and retail, originating with
General Motors dealers, and financed by GMAC, increased
from $20,881,000 in 1919 to $1,133,117,000 in 1929, the
peak figure of GMAC history.
Starting with six branch offices in 1919, and 336 em-
ployees, it grew to 107 branch offices in 1930, with seventy-
three in the United States, nine in Canada, and twenty-five
overseas. The maximum number of employees was reached
in 1929, with 5,532. During 1931 and 1932, twenty-one
branches were closed, and the personnel stood at 3,128 on
December 31, 1932.
Under the most adverse conditions of the depression, loss
ratios on automobiles have been kept down to a point at
which the discounting of an automobile sale is demon-
strated to be one of the safest forms of business developed.
The advantages to General Motors resulting from this
large financial operation, and the insurance business of its
subsidiary, are not confined to its balance sheet. By offering
to dealers plans which provide reasonable accommodation
and adequate protection to themselves and to the buying
public, GMAC has assisted the parent corporation to reach
new high levels of production, built good-will for the Cor-
poration's products, and strengthened the morale of its
selling force the world over.
General Motors Acceptance Corporation and General
Exchange Insurance Corporation have both prospered.
GMAC'S rate of earnings depends, of course, upon the
general volume of trade and the amount of money it can
use. Since trade declined in 1930, GMAC borrowings
from banks have declined simply because it could find no
use for the money freely offered to it at low rates. The Cor-
poration called for redemption on August i, 1932, $5,000,-
ooo of its 6 percent Debentures, and on February I, 1933,
it redeemed all of the remaining $30,000,000 of its 6 per-
cent Debentures.
The present chairman of the board of General Motors
Acceptance Corporation is Mr. Alfred H. Swayne, elected
394 The Turning Wheel
in March, 1921. The president of GMAC from its incorpora-
tion in 1919 until March, 1921, was J. Amory Haskell,
C. C. Cooper then being general counsel. The latter suc-
ceeded Mr. Haskell in the presidency and remained there
until October, 1929, when he was in turn succeeded by John
J. Schumann, Jr.
Chapter XXVIII
COOPERATIVE PLANS
B
EHIND all cooperative plans is the desire to arouse, for
mutual benefit, the individual interest of all who share in
the work. General Motors has fostered several plans
which, after close study, promised to be beneficial both to
the Corporation and to its employees. The extra rewards
of General Motors have been based on a desire to meet, as
far as could be foreseen, and within the frame of other
primary corporate interests, the needs of each of several
well-defined groups.
BONUS PLAN
In 1918 the Bonus Plan was adopted. This plan provided
for annual awards of General Motors Common stock,
or its equivalent, to employees who had contributed to the
success and prosperity of the Corporation in some special
degree by reason of their ability, industry, and loyalty. Dur-
ing the first four years of this plan, awards were made in
two divisions (i) Senior Awards to employees earning
$2,400 and over, and (2) Junior Awards to all other em-
ployees. The plan at this time provided for a bonus fund
equal to 10 percent of the net profits of the Corporation
after deducting 6 percent on the net capital employed. Be-
ginning in 1922 the amount set aside was 10 percent after
deducting 7 percent on the net capital employed, and em-
ployees with salaries of $5,000, and over, were eligible for
39S
396 The Turning Wheel
bonus awards. Although other features have been changed,
the 10 percent deduction of net profits after capital service
has been maintained for bonus purposes. In 1931, em-
ployees earning $4,200, and over, were eligible for bonus
awards. Beginning in 1923, at which time the Managers
Securities Company was organized, the amount set aside for
the bonus plan was 5 percent of net earnings, after 7 percent
on net capital employed, which amount was distributed in
the form of Common stock through the Bonus Plan, the
other 5 percent being paid under contract to the Managers
Securities Company. Beginning in 1930, the contract with
the Managers Securities Company having been terminated,
the full amount of the Corporation's bonus provision of
10 percent of the net profits of the Corporation, after the
deduction of 7 percent on the net capital employed, was
paid to the General Motors Management Corporation. One
half of this payment takes the form of a subscription by
General Motors Corporation for Class A stock of the Gen-
eral Motors Management Corporation. The Class A stock
so acquired is distributed to employees in accordance with
the Bonus Plan. Class A stock received by employees is
equivalent share for share to General Motors Common
stock, and is convertible into the Common stock of General
Motors Corporation at the option of the recipient. The
General Motors Common stock so used for bonus purposes
is purchased in the open market.
Since the inauguration of the Bonus Plan, it has received
the commendation of economists and other authorities as
being one of the best plans as yet developed. Perfection,
however, has not been attained; changes have been made,
and more will be made. It is worthy of note, however, that
the bonus plan is entirely based on rewarding employees
with stock, not cash, thereby setting the stage for a continu-
ing property interest in the Corporation, and also that a
real effort is made to discover meritorious performance.
Bonus stock is delivered to employees in four lots, one
fourth at the time of the award, and the remaining three
fourths is held in trust to be delivered in equal instalments
at the end of each of the three following years. As 7 percent
Cooperative Plans
397
was not earned on the capital employed in 1932, there were
no bonus payments in that year.
A record of the awards follows :
Number of
Shares of
Bonus
Common
Year
Awards
Stock (b)
1918
3,884
490,238
1919
6,453
402,485(0)
1920
6,578
I59,3i2(c)
1921
(a)
(a)
1922
550
179,732
1923
647
226,278
1924
676
115,272
1925
943
345,320
Number of
Shares of
Bonus
Common
Year
Awards
Stock (b)
1926
1,513
428,170
1927
1,998
272,798
1928
2,513
195,570
1929
2,840
167,378
1930
1,929
U7,624(d)
1931
1,378
65,954(<0
1932
(a)
(a)
TOTAL
31,902
3,166,131
(a) No bonus was available for the years 1921 and 1932.
(b) Equivalent number of shares on basis of $10 par value Common
stock.
(c) In addition to the Common stock awarded in 1919 and 1920,
18,934 shares of 7 percent Preferred stock were awarded,
of which 14,191 shares applied to the 1919 awards, and 4,743
shares to the 1920 awards.
(d) Awards in 1930 and 1931 in Class A stock of General Motors
Management Corporation equivalent share for share to General
Motors Common stock.
MANAGERS SECURITIES COMPANY
The Managers Securities Company, as the name implies,
was an effort to reward, consistent with their responsibili-
ties, those holding the more important managerial positions.
Decentralized organization, the term applied to General
Motors system of management, presents a problem of effec-
tive control as between the several operating units and the
Corporation as a whole. In the decentralized system the
manager of a unit is the chief executive, the equivalent of
the president of a separate corporation. Conceivably he
could conduct the affairs of his unit with little regard for
the other units of the group, if he thought that in this way
his own unit would most benefit. The Corporation on the
398 The Turning Wheel
other hand cannot well have one unit reap advantage at the
expense of another; also it is desirous that the benefits
obtained by one unit shall be made available to the others,
so that each one may be advancing not only its own but the
common good of all, which, of course, is the Corporation
itself. These benefits of counsel, cooperation, and team-
work are necessary for effective control, and it was apparent
that they could be secured best by enlisting individual self-
interest.
The tendency for management to become divorced from
stock ownership in large enterprises is a commonplace of
industrial evolution. Both advantages and disadvantages
of this trend have been noted. Among the advantages fre-
quently cited are these : creation of broader public interest
in the Corporation through wide distribution of its stock,
of especial moment to a manufacturer whose goods are in
everyday use by millions of persons; the greater freedom
which management enjoys, in its dealings with the market
and its employees, when personal participation in profit
by management is relatively small compared to the whole
stockholder interest. The point has been made that a cor-
porate management so circumstanced can develop a bal-
anced policy based on long-range views toward the
well-being of each of the three main interests toward which
it is responsible: toward the market into which it brings
goods and services to the public; toward its employees to
whom it supplies the means of life and improving status;
toward the stockholders for whom it earns dividends pro-
portionate to their investments in the property.
On the other hand, it has been noted that too complete
a separation of ownership from management may result
in loss of interest and wasteful administration, since one of
the direct incentives to efficiency is lacking when manage-
ment's share in profits is too small to stimulate to utmost
efforts. This feature received unusual attention in the
autumn of 1923. Mr. Pierre S. du Pont had retired from
the presidency of General Motors with E. I. du Pont de
Nemours & Company owning directly, or indirectly through
its affiliate — General Motors Securities Company — 7,500,-
ooo shares of General Motors Common stock, or more than
Cooperative Plans 399
one third of the total issue of 20,646,397 shares then out-
standing. This represented a higher percentage of the
Common stock than the members of the great Delaware
family and their various corporations have held since. The
block of 7,500,000 shares represented not only what the du
Pont interests had bought as a matter of settled policy, but
also their purchase in the 1920 emergency.
In 1923 the time seemed propitious to reduce this great
block by permitting senior executives of General Motors to
secure holdings, thereby insuring keen personal initiative,
and continuity of management. Accordingly General Motors
organized the Managers Securities Company of Delaware
with an authorized capital stock of $33,800,000, divided
into three classes: $28,800,000 — 7 percent cumulative non-
voting convertible Preferred stock; $4,000,000 Class A
stock; and $1,000,000 Class B stock. The du Pont Com-
pany agreed to sell through its affiliate, the General Motors
Securities Company, which held as its sole asset 7,500,000
shares of the Common stock of General Motors Corpora-
tion, 30 percent of its holdings to Managers Securities Com-
pany. Therefore 2,250,000 shares of General Motors Com-
mon stock were sold to the Managers Securities Company,
on October 15, 1923. Payment for this stock was made with
$28,800,000 — 7 percent Preferred stock of the Managers
Securities Company, and $4,950,000 in cash, making a total
of $33,750,000, or $15 per share.
General Motors subscribed for all the Class A and
Class B stock of the Managers Securities Company, paying
$5,000,000 in cash, and entered into a contract with the
Managers Securities Company, agreeing to pay to the latter
each year from 1923 to 1930, inclusive, 5 percent of its
earnings in excess of 7 percent on the net capital employed.
Under the trust indenture the Managers Securities Com-
pany agreed to pay to the trustee annually a minimum
amount of $1,750,000, and such portions of the remaining
amounts earned under its contract as were in excess of
normal income taxes, dividends on outstanding 7 percent
Preferred stock, and dividends on the Class A and B stocks
limited to 7 percent as long as there were outstanding 7 per-
cent bonds or Preferred stock.
400 The Turning Wheel
General Motors Corporation thereupon sold to certain
managers of the General Motors Corporation, and sub-
sidiaries, such amounts of Class A and Class B stock as
were determined by a special committee of the board of
directors of General Motors Corporation.
The plan was a significant example of Corporation
thought and practice. It provided for all the contingencies
which could be foreseen, such as changes in personnel
through resignation, dismissals and death, with provision
that the determination of the Finance Committee should
prevail in all matters of discretion.
In all, eighty men were selected, to whom Class A and
Class B stocks were sold in varying amounts. A unit of 200
shares of Class A stock, and 200 shares of Class B stock
cost $25,000. The number of units allotted to an individual
depended upon his significance to the Corporation.
Cash dividends approximating $350,000 were paid to
each unit of Class A and Class B stock during the seven
years of the company's contractual life. At the start, the
holder of one unit received dividends of only $600 a quar-
ter, the balance of earnings going to debt service. As the
debt was reduced, the quarterly dividends paid to the man-
agers rose. The sums devoted to debt service reduced the
company's obligation to such a point that in 1926 the bal-
ance of the purchase price was financed at a lower interest
rate. The original indebtedness of $28,800,000 was fully
paid by 1927.
The rapid rise in earning power of General Motors
Corporation during these years brought a phenomenal in-
crease in the value of these units. Each beneficiary of the
plan receives eventually, for each original unit bought,
22,545 shares of $10 par value Common stock; and even at
the low price prevailing in 1933 the value of an original
unit was more than ten times its original cost.
It has been said that General Motors made many men
independently rich through its Managers Securities plan. Of
course, heaping up wealth for them so abundantly and
swiftly was not contemplated when the proposal was made
and the plan drawn. At that time the prospect was that the
managers, with good luck and the best of team-work, would
Cooperative Plans 401
reap perhaps a fraction of what they actually received. No
one could anticipate the rosy future which was destined for
the Corporation and the country at large during the six
years that followed. To what extent the stimulation of
managerial interest added to profits cannot be determined
accurately, but this was probably a very considerable fac-
tor in the strides which the Corporation took. To some ex-
tent, the managers rewarded had created their own for-
tunes.
The Corporation's contract with the Managers Securities
Company was to have expired on December 31, 1930, but
was terminated by agreement on December 31, 1929, in
order to organize the General Motors Management Cor-
poration along somewhat the same lines as the Managers
Securities Company.
GENERAL MOTORS MANAGEMENT CORPORATION
With the termination of the contractual relationship with
the Managers Securities Company as of December 31, 1929,
the advantages of the plan were so manifest that the Gen-
eral Motors Management Corporation, organized in
March, 1930, consolidated the Corporation's two previ-
ously mentioned profit-sharing plans.
The General Motors Management Corporation was
formed in Delaware with an authorized capital of $10,500,-
ooo, consisting of 50,000 shares of Common stock, 500,000
shares of Class A stock, 500,000 shares of Class B stock,
all of $10 par value.
This capital was authorized to cover the functions previ-
ously carried on under the Managers Securities Company
and the Bonus Plan, to carry both profit-sharing arrange-
ments forward for seven years, to March, 1937.
General Motors Corporation sold to the Management
Corporation 1,375,000 shares of General Motors Common
stock at $40 per share. This stock had been purchased from
time to time in the open market by General Motors Cor-
poration in anticipation of a profit-sharing plan to replace
the Managers Securities Company. The Management Cor-
poration financed this purchase by the sale of 50,000 shares
402 The Turning Wheel
of Common stock at $100 per share, and by the issuance of
$50,000,000 of seven-year 6 percent serial Debenture
bonds. General Motors Corporation subscribed to the 50,-
ooo shares of Common stock, and in turn sold the bulk of
the shares to some 220 of its executives at $100 a share.
General Motors entered into a contract with the General
Motors Management Corporation, agreeing to pay the
latter yearly on or before March loth of the succeeding
year for a period of seven years ending December 31, 1936,
a sum equal to 5 percent of the net earnings of General
Motors during the preceding calendar year after deducting
7 percent on the capital employed. In addition, General
Motors agreed to subscribe an amount equal to an ad-
ditional 5 percent of its earnings to the Class A stock of
the Management Corporation, at the book value thereof,
based upon the cost of the General Motors Common stock
which the Management Corporation was to purchase from
time to time in the open market.
The payments on account of earnings, under the contract,
after making provision for income taxes, accrue exclusively
to the benefit of the Common stock. These net earnings are
capitalized and paid to the Common stockholders as a
dividend in Class B stock. There is allocated to each share of
Class B stock one share of General Motors Common stock.
EMPLOYES' SAVINGS AND INVESTMENT PLAN
One of the most significant, comprehensive, and inter-
esting plans in the history of industrial relations is the Em-
ployes' Savings and Investment Plan, established by the
Corporation in 1919. As the Corporation grew, and the
number of employees increased, many plans were considered
for providing for them in their later years when they were
retired or to tide them over times of need. Instead of fol-
lowing a more conventional corporate plan, John J. Raskob
conceived the idea of enlisting the interest of employees
throughout the organization (in 1919 numbering 85,000)
in a plan of systematic saving and the building up of in-
dividual estates through these savings, aided by propor-
tionate contributions on the part of the Corporation — these
Cooperative Plans 403
contributions being made in such a manner as would give
employees an opportunity of sharing in the development of
the business. It was felt that, by helping those who helped
themselves, they could attain positions of individual inde-
pendence that would enable them to care for themselves
and their families in later years. Since the inauguration of
the plan, experience has brought out the values of various
features in it, additional to those with which it was origi-
nally and chiefly concerned.
The plan provided for the establishment of two funds,
a Savings Fund and an Investment Fund, a new class to be
started at the beginning of each year, and to mature in five
years. As indicated previously, the plan originated with the
class of 1919. Into the Savings Fund of each class, as it was
formed, any employee who had been in the service of the
Corporation for three months or more was allowed to pay
10 percent of his earnings, not to exceed $300 for the year.
The limit in 1927 was increased to 20 percent but, begin-
ning with the current class of 1933, it has been revised to
10 percent, as it was originally. Payments into the fund were
facilitated by having the employee designate the amounts he
wanted to save periodically, and then deducting such
amounts from his regular wage or salary. For each dollar
thus paid into the Savings Fund by the employee, and re-
maining to his credit at the end of the year, the Corporation
contributed a given amount to the Investment Fund for the
account of such employee.
The Corporation's contribution, under the plan operative
.for the classes of 1919, 1920, and 1921, ran as high as
dollar for dollar; for the classes, 1922 to 1932, inclusive,
the contribution was fifty cents for each dollar; and, under
the new plan beginning with the 1933 class, twenty-five cents
for each dollar will be paid. The monies thus paid in by
the Corporation are invested in Common stock of General
Motors Corporation, as is also the income therefrom dur-
ing the life of the class, and accrue to the benefit of the
employee. On payments into the Savings Fund, the em-
ployee is credited with interest at the rate of 6 percent
per annum, compounded semi-annually, except for the last
404 The Turning Wheel
four classes, in which interest was compounded annually.
Beginning with the current class of 1933, in view of the
lower prevailing interest rates, the rate in Savings Fund
payments has been changed to 5 percent, compounded
annually.
As a new class is started at the beginning of each year,
it is possible for each employee to have at one time 10
percent of his annual wage, up to $300, invested in each
of six consecutive savings classes, or a total maximum
investment of $1,800. Means are provided whereby the
employee may withdraw his funds with accrued interest any
time he wishes. In the event of his leaving the Corporation,
he must withdraw his funds except in special discretionary
cases. If he makes such withdrawals, he receives back not
only his original savings, with accrued interest, but a certain
portion of the Investment Fund which has been credited to
his account, in relation to the length of time his savings
payments remained in the fund. Under the plan governing
the first three classes, 1919, 1920, and 1921, the unaccrued
portion of the Investment Fund of the withdrawing em-
ployee was distributed to the surviving participants at
maturity, but this tontine feature was eliminated beginning
with the class of 1922 — the forfeited Investment Fund por-
tion subsequently reverting to the Corporation.
Nine classes have matured since the plan was inaugu-
rated, and receipts by employees in the various maturities
have ranged from a return of more than two-to-one on their
original investment to more than nine-to-one, the average
for the nine classes being better than five-to-one. An em-
ployee who saved in these nine classes, $300 in each class,
$2,700 in all, has received $4,204.80 in cash and Common
stock equivalent to 367^2 shares of the present $10 par
value stock.
In connection with the plan, the Corporation permitted
an employee to have his payments in the Savings Fund ap-
plied on the purchase of a home and, at the same time,
receive the full benefits from the investment fund at
maturity. Over 43,000 employees have been assisted in buy-
ing homes through this arrangement.
Cooperative Plans 405
In 1929 the participation in the Employes' Savings and
Investment Plan reached the highest point, with 185,000
employees participating in one or more classes.
At the beginning of the industrial depression, the par-
ticipating employees of the Corporation entered 1930 with
a reserve of approximately $75,000,000. In addition to this,
there was an equity of approximately $15,000,000 which
had been diverted to the purchase of homes or, in other
words, an accumulated fund of approximately $90,000,000
was available as a result of the previous five years payments
and of the contributions to the Employes' Savings and In-
vestment funds.
There were further payments made into the funds by
both the employees and the Corporation, from January i,
1930, to April 30, 1932, at which time the plan was
suspended. During the three-year period, 1930 to 1932, in-
clusive, there was disbursed a total of $78,000,000. At the
end of 1932 there was still available, in both funds, ap-
proximately $47,000,000, to which should be added $13,-
000,000, remaining equity in the purchase of homes, or a
total of $60,000,000.
The largest disbursement in any one year took place in
1932 when approximately $44,000,000 was distributed.
This total distribution represented the amount received by
participants in the matured class of 1926, and the amount
withdrawn from the fund by employees whose services with
General Motors were terminated, or who required money
to meet their various needs. Of the total disbursement,
$30,719,705 constituted the employees' own original sav-
ings, and the balance of $13,421,913 interest and Invest-
ment Fund benefits (cash and securities) paid by the Cor-
poration.
As can be readily appreciated, the plan has proven of
incalculable benefit, particularly during periods of stress.
It has given a large measure of security to employees
who were laid off or put on part time, as well as to those
who, though working, have had to meet various emergen-
cies. It has enabled large numbers to go back to farming;
has provided money to many to engage in small business
enterprises of their own; and has assisted thousands to make
406 The Turning Wheel
adjustments to new conditions. In many communities,
through the distribution of these funds accumulated during
better times, it has relieved public and private welfare
agencies of a tremendous burden.
During the fourteen years the plan has been in operation,
up to January i, 1933, cash in the sum of $105,439,122 was
paid in interim settlements, that is, settlements made prior
to maturity. In addition, there was paid, through the nine
matured classes, $51,7375237, representing $30,406,661 in
cash and 1,624,414 shares of General Motors Common
stock; valued at the market prices prevailing at the different
maturity dates, this figure would be $75,912,990. If the
market value of the securities at the time they were dis-
tributed is taken into account, the total value to employees
was $232,455,35 1.
This large figure indicates to some extent the size and
scope of the Employes' Savings and Investment Plan. Fur-
ther payments into the fund were temporarily suspended
after April 30, 1932, because of the economic situation. On
August i, 1933, in view of improved conditions, the Sav-
ings and Investment Plan was resumed with certain modi-
fications, as previously explained, to meet the new situation.
EMPLOYES' PREFERRED STOCK SUBSCRIPTION PLAN
Related to the Employes' Savings and Investment Plan,
the Corporation had another plan, the Employes' Preferred
Stock Subscription Plan, which was in operation from 1924
to 1930, inclusive.
Any employee who wished to invest could buy propor-
tionately to his salary 7 percent Preferred stock of General
Motors in amounts from one to ten shares, each year, at a
price fixed annually. The cash proceeds in the Savings and
Investment classes, as they matured, could be applied to the
payment for the stock or payment could be made out of
salary or wages over a period of a year.
To make the plan more attractive, there was made each
year, for five years (provided the employee remained with
the Corporation) an extra payment of $2 a share, in addi-
tion to the regular $7.00 a share dividend.
Cooperative Plans 407
This plan was discontinued at the close of 1930. No fur-
ther Preferred stock offering has been made to employees
since, but the $2 extra payment was continued during the
life of present classes.
GROUP INSURANCE PLAN
In order to encourage employees to protect their de-
pendents, General Motors Corporation arranged with the
Metropolitan Life Insurance Company for the issuance
of an employees' cooperative group insurance policy, effec-
tive December i, 1926. Under this plan all applying em-
ployees of General Motors, its subsidiaries, and affiliates
may be insured without medical examination, provided they
had been employed for three months or more. The cost is
shared by the employees insured and the General Motors
Corporation. In addition to regular life insurance, em-
ployees who become totally and permanently disabled be-
fore the age of sixty receive the face value of their policy
in twenty equal instalments, the first monthly payment being
made three months after proof of the disability. If death
occurs during such disability, the remaining value of any
instalments unpaid will be paid in full to the beneficiary.
Any insured employee leaving General Motors may obtain
from the insurance company within thirty days, without
medical examination, an equivalent amount of life insurance
at rates applicable to his age and class of risk.
In 1928 the insurance plan was enlarged to include in-
creased death and total disability benefits, and in addition,
health and non-occupational benefits were added at a small
increase in the cost. Under the new plan an employee could
receive sick benefits for several different disabilities during
the same year, each benefit covering a period of not more
than thirteen weeks. Furthermore, in the case of permanent
and total disability an employee could receive temporary
sick benefits for thirteen weeks, and then be eligible for
total and permanent disability benefits for a period of forty
months. Thus the combined benefits for a totally and per-
manently disabled employee might cover a period of three
years and seven months.
408 The Turning Wheel
In 1931 the total and permanent disability benefits were
restricted to those individuals who had been continuously
employed by the Corporation for two full years. At the
beginning of 1933, it was deemed advisable to eliminate
the total and permanent disability benefit because the ex-
perience of the insurance company, along with that of all
other companies, had been such that this benefit could not
be continued without an appreciable increase in contribu-
tions by the employees. Under the new arrangement a group
policy provides that if an employee becomes permanently
disabled after he leaves employment, and dies prior to his
sixty-fifth birthday, and within twelve months after leav-
ing, the amount for which he is insured will be paid in full
to his beneficiary. Under the old plan an employee must
have been insured for two years before becoming eligible
for the benefit under the total and permanent disability
clause. The provisions in regard to regular death benefits
remain the same, while temporary disability benefits have
been reduced slightly.
During 1932 the Corporation lost 1,048 of its employees
through death or permanent disability, on account of
which, payments totaling $2,273,306 were approved for the
benefit of such employees or their dependents, and, in addi-
tion, there were 9,834 employees who received benefits
amounting to $827,739 on account of temporary disability
resulting from sickness or non-industrial accidents. Under
the group insurance plan approved claims for the benefit
of the Corporation's employees and their families have
totaled $16,491,080 from the inception of the plan on
December i, 1926, up to and including December 31, 1932.
At the end of 1932 over 99 percent of eligible employees
were participating in this plan.
EMPLOYEE EDUCATION AND TRAINING
Any list of activities of mutual benefit to employees and
the Corporation should include the pioneer work that has
been done by the Corporation in the field of employee edu-
cation and training, which is now largely centralized
through the General Motors Institute at Flint.
Cooperative Plans 409
The General Motors Institute itself developed out of a
plan suggested by Mr. J. Dallas Dort of the Durant-Dort
Carriage Company about twenty-five years ago, to secure
cooperation between management and wage earner. Flint's
first effort in this direction was the Flint Vehicle Workers'
Mutual Benefit Association, which began as a mutual insur-
ance society and gradually developed social, athletic, and
entertainment features. This grew into the Industrial
Mutual Association, huge in membership, occupying large
clubrooms, and sponsoring a broad program of recreation
and education in addition to maintaining its insurance and
welfare features, managed by directors elected by the mem-
bers of the Association, most of whom are General Motors
employees. The I.M.A. auditorium in Flint is the largest
assembly hall there, and the scene of the city's popular con-
certs, athletic contests, and mass meetings. As an employee-
managed enterprise, I.M.A. has been remarkable not only
for its size and success, but also for its public spirit, humani-
tarian leanings, and educational enterprise.
The educational program originated by the association
was based upon the principle that the best way to help an
individual is to help him help himself. It began as an eve-
ning school, with convenient short-unit courses closely re-
lated to the requirements of the automotive industry, and
of such a nature that they could be arranged in flexible
sequences to meet the needs of individual employees from
the plants for further training.
As its courses of instruction increased both in popularity
and number, particularly in technical lines, a closer union
with the factories seemed advisable, since students were
preparing themselves for increased usefulness in the auto-
motive trades. Thus the educational activities of I.M.A.
came to be organized into the Flint Institute of Technology.
Mr. Harry H. Bassett, then president of Buick and since
deceased, took an active interest in the school, and in 1926
enlisted the support of General Motors, after which it be-
came General Motors Institute of Technology. Suitable
buildings and grounds were secured for the school to meet
the requirements of divisions and subsidiary companies of
General Motors. There are facilities for 2,800 day and
410 The Turning Wheel
evening school students; the faculty has numbered forty-
two members giving full time, besides sixty part-time in-
structors.
To this institution then fell the task of providing a
means through which the effort and experience of the Cor-
poration might be pooled in the development of a sound
training program for the various divisions and their em-
ployees. It also provided an agency for types of training
which could best be conducted for the Corporation as a
whole through a central program.
Harry H. Bassett (1875-1926}, President and General Manager,
Euick, 1919-26
The training program, as it developed, divided itself into
two main branches : first, that designed to contribute to the
development of employees of the existing organization and,
second, foundation or apprenticeship training of young men
for beginning connections with the company. The first is
conducted through spare time and extension courses, the
second through full-time and cooperative training courses.
In the extension program, a major emphasis has been
placed upon executive training for foremen and prospective
executives. Here the wide pioneer experience of the entire
Corporation from the very inception of the movement was
Cooperative Plans 411
pooled in the development of the executive training pro-
gram. There was thus provided a uniform program rep-
resenting the best experience and executive policies of the
Corporation in form available to all divisions in Canada and
overseas, as well as in the United States. During the years
of 1928 and 1929, this program reached as many as 5,000
employees of the Corporation, representing practically all
of the divisions.
In the instruction of young beginning employees, the
major emphasis has been placed upon cooperative training
— the General Motors Cooperative Training Program for
manufacturing units, and a corresponding Dealer Coopera-
tive Service Training Program for the service field. These
programs combine with a practical experience in the plant
or service station an intensive, related program of technical
instruction given at the Institute through the cooperative
plan of alternate periods of work and study. The program
thus gives the young men both the practical and technical
equipment needed to meet the requirements of the field for
which they are being trained.
The Institute, because of its central position, thus be-
comes practically a research laboratory in training. It con-
ducts certain types of training through a central program
for the entire Corporation, and in addition, in cooperation
with the divisions of the Corporation promoting an interest
in personnel development, it develops methods and tech-
niques, collecting and correlating the experience of the en-
tire Corporation, and bringing to each division the advan-
tage of the knowledge thus gathered. The single objective
is that of developing more effective means of personnel
training for the Corporation.
During the later stages of the depression, in common
with most educational efforts, the work of "General Motors
Tech" has been somewhat curtailed, and its program re-
vised to correlate more closely with the changing require-
ments of the industry. The Institute, and the program which
is centralized through it, have been recognized by educators
and industrial executives as one of the best managed in-
dustrial educational training programs in the country.
412
Cooperative Plans 413
HOUSING
Reference has been made to General Motors' extensive
housebuilding programs in a number of the cities where its
large manufacturing plants are located. Back of all these
construction projects was a definite desire to provide better
housing for employees in swiftly growing cities where
private building operations lagged behind the needs of the
wage-earning population. Large subdivisions were plotted,
streets opened, sewer systems installed, and connections
made with public utilities. In some cases community halls
were erected for public and social gatherings. The projects
were carefully planned from the standpoint of attractive
street layouts, open spaces, and landscaping. The best pos-
sible house was built for the money, with all benefits of
large-scale buying inuring to the purchasing employee. Com-
plete in all respects, the houses were sold to employees on
reasonable deferred payments which might be deducted
from wages. Through the operations of the Savings and
Investment Fund, from which deductions could be made on
house-buying account without diminution of the employee-
interest, the Corporation considerably eased the lot of
thrifty employees in their progress toward house owner-
ship.
COOPERATIVE GARDENING
In the past few years some of the units of the Corpora-
tion have fostered cooperative gardening for the benefit of
employees, both those on the pay roll and those temporarily
laid off. As a general practice, the unit provides the land,
renting it if necessary; attends to the plowing; provides the
seeds and plants, and competent direction. As instances
along this line may be cited the Harrison Radiator Corpora-
tion, Lockport, New York, and the particularly successful
experiment of the McKinnon Industries, Ltd., St. Cath-
arines, Ontario.
WELFARE WORK
Nearly all General Motors plants maintain various
services for their employees. These are under the direction
of plant managers, and are of so many sorts that no
414 The Turning Wheel
adequate description can be given of them here. Historically,
Chevrolet seems to have been the leader of General Motors
in developing work of this nature, and many of its pioneer-
ing welfare activities have been widely copied both inside
and outside of the Corporation.
In the Corporation's annual reports various of these
plans and programs have been discussed in great detail, with
emphasis on the fact that they have been inaugurated "for
the purpose of promoting the effectiveness and well-being
of the Corporation's operating personnel." The 1932 re-
port says :
It has been stated that the fundamental objective in all these plans
has been to help the individual to help himself ; to make him a bet-
ter citizen; to give him the opportunity to become independent.
In the main this objective has been gained, and in those
particulars where the greatest measure of successful co-
operation has been achieved, it is to be expected that the
Corporation will go considerably farther in the direction
of employee-benefits.
The oldest and most important of General Motors co-
operative plans have been revised freely under the influence
of changing circumstances.
Chapter XXIX
PUBLIC RELATIONS
UBLIC RELATIONS arise out of a corporation's policies
in its dealings with actual and potential customers. Good
public relations make for confidence in an institution. Yet
mere good-will that leads nowhere is not enough. What a
corporation wants is the expression of a belief in its in-
tegrity through the purchase of its products or services;
and the confidence of those whose capital it uses and those
with whom it transacts business while producing those goods
and services.
Good products and good services are a fundamental ob-
jective of good management. So also are satisfactory public
re